The BHP Billiton Limited (ASX: BHP) share price has joined Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) in taking a bath this month, as iron ore prices fall.
BHP shares slide in September
As can be seen above, shares in resources companies, specifically those in iron ore, have come off the boil in recent weeks.
What's going on?
Overnight, iron ore fell slightly to $US63.06 per tonne. That's a way below the $US88.80 per tonne it was trading for earlier this year.
Indeed, last year's steep price falls pushed higher-cost suppliers out of the market and caused a modest shift in supply.
And despite concerns over its housing market, the demand from China — who consumes 60% of all iron ore for steelmaking — kept chugging along, pushing prices higher.
Obviously, the recent falls in iron ore prices, along with some softness in oil, has spooked investors in companies such as BHP.
Is it time to sell shares of iron ore miners?
I could not tell you with reasonable certainty where the price for iron ore will head tomorrow or this week. Nor can anyone guarantee where it will be at the end of this year or the next. We could look at historical prices — which are on average a long way below the current market price — but that will not tell you much either.
Uncertainty is everywhere in commodities markets unless you are a professional derivatives trader. It is for this reason that I prefer not to hold shares in iron ore miners or resources companies — unless we are being offered a bargain. Therefore, purely from a risk perspective, I think BHP and other resources companies should make up only a smaller portion of your overall share portfolio in 2017.
