Australia's iron ore miners are once again acting as a drag on the sharemarket after the commodity sunk to a fresh six-year low overnight. According to the Metal Bulletin, the key steelmaking ingredient fell by roughly 3.3% to just US$56.95 per tonne.
The latest fall can likely be attributed to nerves relating to Chinese demand. Fears are certainly growing that Chinese expansion will continue to slow after official data, released last week, showed that production, consumption and investment growth had all fallen to multi-year lows. While some investors are hopeful of fresh stimulus from Beijing, it seems that others are less optimistic.
At the same time as demand is slowing, a tidal wave of fresh supplies is hitting the markets. BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have recently confirmed they won't be scaling back their lofty production targets, while Fortescue Metals Group Limited (ASX: FMG) and Brazil's Vale are also increasing their supply levels.
Here's how the latest fall has impacted our miners today….
- Rio Tinto Limited down 0.5%
- Fortescue Metals Group Limited down 5.1% (notably, it announced that it was abandoning its bond issue)
- BHP Billiton Limited up 1.2%
- Arrium Ltd (ASX: ARI) down 1.8%
- Mount Gibson Iron Limited (ASX: MGX) down 2.2%
- Atlas Iron Limited (ASX: AGO) down 2%
Before you rush out and buy the miners while they're down however, it's important to know that conditions are expected to get worse (perhaps significantly so) before they begin to improve. As reported by The Australian, Citi has warned of a near-term fall to US$50 a tonne while Westpac's chief economist says the commodity won't see a recovery until at least 2016. As such, investors would be wise to steer well clear of the sector altogether, for now.
