Shanghai to ease COVID-19 lockdown: How it may impact ASX iron ore stocks

Be the First to Comment Read

Shanghai to ease COVID-19 lockdown: How it may impact ASX iron ore stocks

Shanghai to ease COVID-19 lockdown: How it may impact ASX iron ore stocks
Image source: © Helderpc | Megapixl.com

Highlights

  • China’s plans to ease COVID-19 restrictions have raised expectations of a demand revival.

  • On Monday, Chinese iron ore futures surged, supported by supply concerns.

  • ASX-listed iron ore shares have witnessed some big swings over the past 12 months.

While China’s strict COVID-19 lockdowns damaged growth prospects, the country’s recent plans to ease restrictions have raised expectations of a demand revival. Global investors are now looking past Shanghai's June reopening plan and a home-loan rate cut for first-time buyers.

The decision to relax restrictions follows weaker-than-expected economic data showing the country's economic activity had cooled sharply in April due to weeks-long lockdowns. These restrictions had mainly triggered concern for world's top steel producer’s struggling property sector, the source of around 30% of its steel demand, weighing on global iron stocks.

On Monday, Chinese iron ore futures surged, supported by supply concerns, and shrinking portside inventories of the steel making ingredient. The most-traded September iron ore contract on China's Dalian Commodity Exchange ended daytime trade 3.9% higher at 834.50 yuan (US$122.80) a tonne, after posting its biggest weekly loss in nearly three months on Friday.

What’s in store for ASX iron ore stocks?

ASX-listed iron ore shares have witnessed some big swings over the past 12 months. These stocks have reaped gains out of rebounding prices for the industrial metal since November last year. However, the ongoing lockdowns and China’s state planner, the National Development and Reform Commission’s recent announcement that crude steel output would be kept below 2021 levels, doesn’t bode well for iron ore stocks. If the steel output remains below the last year’s levels, it would be the second annual fall in two years.

In 2021, China’s steel output fell due to the government-enforced mill shutdowns. The Chinese output fell over 6% (Y-O-Y) to 88 Mt in March, with global output falling nearly 6%, according to the World Steel Association.

Meanwhile, ASX-listed iron ore stocks heated up earlier this month, after the People’s Bank of China pledged to provide a fair monetary and financial environment to support the economy.

Against this backdrop, let’s look at three ASX-listed iron ore miners with a market cap of more than AU$38 billion:

BHP Group Ltd (ASX:BHP)

BHP Group has a market capitalisation of AU$229.37 billion. In FY21, the group reported a net profit of AU$11.3 billion over a revenue of AU$56.92 billion. The stock is up over 7% on a year-to-date (YTD) basis.

Rio Tinto Ltd (ASX:RIO)

Rio Tinto has a market capitalisation of AU$38.75. In FY21, the miner more than doubled its net profit to AU$21.09 billion, from a profit of AU$9.76 billion in FY20. The stock is up nearly 7% on a YTD basis.

Fortescue Metals Group (ASX:FMG)

Fortescue Metals has a market capitalisation of AU$58.37 billion. In FY21, the miner clocked AU$10.29 billion in profit, significantly higher than FY20 profit of AU$4.73 billion. The stock fell over 2% on a YTD basis.

RELATED ARTICLE: A2M, BGA, BUB: Why are these ASX dairy stocks in news?

RELATED ARTICLE: SportsHero (ASX: SHO) launches esports platform on WeChat, shares up 11%

RELATED ARTICLE: Australia’s first Crypto ETF underwhelms on debut

Disclaimer

Speak your Mind

Featured Articles

Ad
kalkine logo

GET A FREE STOCK REPORT

Top Penny Picks under 20 Cents to Fit Your Pocket! Get Exclusive Report on Penny Stocks For FREE Now.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK