Iron Ore Bull Run Continues But ASX Miners Weighing Down Ahead Of G-20

Iron Ore Bull Run Continues But ASX Miners Weighing Down Ahead Of G-20

The iron ore prices recovered sharply today to reach the day’s high of RMB 844.0 post starting the day at RMB 825.5, which in turn, took the iron ore prices to another new high amid tighter supply conditions. The steel-raw material is currently trading at RMB 835 (as on 28th June 2019 12:47 PM AEST).

Iron ore prices took a jab previously as mills in China started implementing voluntary production cut, over chocking steel prices amid high steel inventories across China.

The iron ore prices dropped on the Dalian Commodity Exchange from the level of RMB 835 (Day’s high on 21st June 2019) to the level of RMB 779 (Day’s low on 26th June 2019); however, the prices inched up again in the market from the level of RMB 779 to the present high of RMB 844 over shortage in the supply chain.

Steel Build-up:

China previously saw a build-up in social and mills steel inventory of both steel rebar and hot-rolled coil (HRC) steel. The environment of falling steel prices hampered the raw-material prices as well.

In the status quo, the World Steel Association mentioned on 24th June 2019, that the production of crude steel across 64 countries inched up by 5.4 per cent as compared to a year ago and stood at 162.7 million metric tonnes in May.

China, as a major steel producer, accounted for 10 per cent of the overall global crude steel production. The higher steel inventory in China in the environment of stagnant demand exerted pressure on steel prices and the prices jolted in the international market.

Post the price drop, many mills in China across various provinces decided to curb the production, while the steel inventory in China inched by 1.35 per cent to stand at 12.96 million tonnes (as on 21st June).

The steel rebar in the domestic market traded at RMB 3890 (as on 21st June); while, HRC traded at RMB 3790 (as on 31st June) a tonne respectively.

Freight Rates:

Apart from the high steel build-up in China, the Freight charges reduced, which could exert the pressure on iron ore prices.

The Freight Charges from Western Australia to Qingdao port in China stood at US$7.11 per tonne (as on 26th June), down by 0.55 per cent from its previous reported quotes.

Likewise, the freight rates from Tubarao Port in Brazil to Qingdao Port in China stood at US$18.44 per tonne, slightly higher than its previously reported price.

Iron Ore on Charts:

DCIOU9 Daily Chart (Source: Thomson Reuters)

On a daily chart, the iron ore prices are currently taking the support of RMB 776, and the prices recently breached the upper band of the Bollinger band with a 20-days simple moving average as the median. Investors should keep a close eye at the level of RMB 776 as a break below or sustain above the same level would decide further price action in it.

The median of the 20-days Bollinger band could provide second support to the prices if the prices breach its primary support of RMB 776.

On a daily chart, the Relative Strength Index of 14-days period is showing a divergence with the price actions. While the prices are climbing and making a new high, the Relative Strength Index is failing to do so.

 The share prices of Australian Miners are skyrocketed, and one possible reason for the upside could be the reaching deadline of IMO 2020. However, the miners are showing a fall ahead of the upcoming G-20 meet.

Iron Ore Miners on ASX:

BHP Group Limited (ASX: BHP)

BHP is enjoying the iron ore price rally and the advantage of new IMO 2020 regulations. Market speculators and investors seem to identify the IMO 2020 regulation advantage of the company, and the shares reached a new 52-week high of A$42.000 on 27th June 2019.

BHP Daily Chart (Source: Thomson Reuters)

On a daily chart, the share price of the company is moving in an uptrend, and a Golden Cross (bullish signal) of 50 and 100-days exponential moving average emerged, which in turn, signifies a short-term rally.

The prices faced the hurdle of 100.0 per cent projected level of the Fibonacci Series, which is produced after connecting the wave points marked as 0,1,2 on the chart shown above and is at A$42.023. After facing the hurdle, the prices dropped today on ASX and are currently at A$41.040 (as on 28th June 1:59 PM AEST).

BHP closed the day’s session at A$41.240, down by 1.692 per cent as on 28 June 2019.

Fortescue Metals Group Limited (ASX: FMG)

FMG is also following the same trajectory, and the share price of the company is currently supported by lower iron ore supply and new IMO 2020 regulations, which is advantageous to the Australian iron ore miners. The share prices reached a new 52-week high of A$9.180 (as on 27th June 2019).

FMG Daily Chart (Source: Thomson Reuters)

On a daily chart, a Golden Cross (bullish signal) of 50,100, and 200-days exponential moving averages occurred, and the share price rallied to the new 52-week high. On projecting (0,1,2) the further levels with the Fibonacci Series, it can be seen, that the share prices of the company already breached the projected level of 61.8 per cent, which is at A$8.984, and are currently taking the support of the same  61.8 per cent projected level.

The 100 per cent Fibonacci projection reaches the level of A$9.811, and the RSI value is still significantly below its hurdle level of 96.338, which in turn, suggests that the bulls are in strength.

FMG closed the day’s session at A$9.005, down by 1.906 per cent as on 28 June 2019.

BlueScope Steel Limited (ASX: BSL)

Post showing a substantial loss in value, the ASX-listed steel producer- BSL is surging up on the Charts.

 BSL Daily Chart (Source: Thomson Reuters)

The share price of the company marked the presence of the Death Cross (bearish signal) twice of 50 and 100-days exponential moving averages(Orange Circle); however, the prices tried to rise and showed a golden cross (green arrow) but failed to rally.

In the recent event, the prices crossed the 50-days EMA and rose, but 100-days EMA offered resistance to the price, and the prices dropped again.

The investors should keep a close eye around the level of A$12.593, as a break above or a failure to do so would decide further actions in it.

BSL closed the day’s session at A$12.070, down by 3.052 per cent as on 28 June 2019.

Sims Metal Management (ASX: SGM)

The metal recycler- Sims Metal Management Limited (ASX: SGM) is also showing promising recovery on Charts, contrarian to the metal sector, which is currently facing the global heat.

SGM Daily Chart (Source: Thomson Reuters)

Post presenting a Death Cross (bullish signal) on the daily chart, the share price of the company fell. However, in the recent scenario, the share price of the company breached its 50,100, and 200-days exponential moving averages and the 61.8 per cent projected level of the Fibonacci Series, which is at A$11.131. However, the 200-days EMA offered resistance, and the prices fell again today on ASX.

The investors should keep a close eye around the present level as the RSI is also moving towards its hurdle level of 84.493, and the share price could take the support of the 100-days EMA. Sustain above the 200-days EMA or a break below it would decide further actions in it.

SGM closed the day’s session at A$10.860, down by 3.209 per cent as on 28 June 2019.

Rio Tinto Limited (ASX: RIO)

RIO Daily Chart (Source: Thomson Reuters)

The share prices of the company marked a Golden Cross (bullish signal) and rose substantially. However, the current 61.8 per cent projected level of the Fibonacci Series is providing strong resistance, and a break above or sustain below would decide further actions in it.

In a recent announcement, Rio mentioned that Oyu Tolgoi LLC, in which the company holds 33.5 per cent indirect interest, entered into agreements with China Machinery Engineering Corporation and two other Chinese EPC contractors, which further creates a smaller party transaction for UK Listing Rules.

The other two EPC contractors are Harbin Electric International Company Limited and Power Construction Corporation of China, and all the three EPC contractors are State-Owned. As part of a competitive tender process, each of the three EPC contractors would submit a bid for construction, engineering and design of a power station at the Tavan Tolgoi coal fields.

The proposed power station at the coalfield would provide power for the Oyu Tolgoi LLC copper mine in Mongolia, and the company offered a rebate of US$350,000 to the bidder who submits a conforming bid and does not receive the EPC contract.

Rio previously conducted a smaller party transaction by announcing a stake sale in Rossing Uranium Limited to China National Uranium Corporation Limited and decided on another smaller party transaction amid twelve-month aggregation provision in the UK Listing Rules.

RIO closed the day’s session at A$103.760, down by 2.353 per cent as on 28 June 2019


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