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Iron Ore Price rally Greasing the Wheels of ASX-listed Metals and Mining Stocks

  • November 23, 2020 12:55 PM AEDT
  • Kunal Sawhney
    CEO Kunal Sawhney
    2345 Posts

    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

Iron Ore Price rally Greasing the Wheels of ASX-listed Metals and Mining Stocks

ASX-listed metals and mining stocks are heading north on the exchange with the recovery in prices of commodities such as iron ore, gold, and base metals across the globe. The recovery in the M&M space is largely led by ASX-listed iron ore stocks after the underlying commodity witnessed a strong gain for the fourth consecutive session.

Gold MTF non-AMP

Iron ore futures on the Dalian Commodity Exchange rose from USD 819.50 (intraday low on 16 November 2020) to the recent high of USD 889.00 (as on 20 November 2020), marking a price appreciation of ~ 8.48 per cent.

China: Rebar Inventory Shortfall Boost Prices

The surge in iron ore prices was primarily led by a decline in steel inventory across China, and a shortfall in iron ore inventory across major Chinese ports lifted market sentiments, leading to a rush in ASX-listed iron ore stocks.

Image Source: © Kalkine Group 2020

China steel rebar inventories continued to fall for the week ended 20 November 2020 as the steel demand gradually picked up across the nation post weak demand due to winters for a while. China rebar inventories across steelmakers and social warehouses declined 9.5 per cent against the previous week for the period at 6.84 million metric tonnes.

Furthermore, despite an overall slump in demand for steel rebar, the decline in inventory supported the price of rebar contract, which has been climbing the price ladder swiftly, prompting the steel mills across China to fill in the gap and take the price advantage.

Thus, supporting the demand for iron ore across China. A slight increase in iron ore demand coupled with an inventory shortfall supported a mini bull rally in the commodity.

Iron Ore Demand Surges Whilst Inventory Extends Further Decline

Iron ore inventories across 35 significant Chinese ports declined by 820,000 metric tonnes at 120.24 million metric tonnes (as on 20 November 2020), marking the second consecutive week of decline. The drop in inventory further crossed ways with an increase in demand, as inferred from an increase in daily average deliveries.

Daily average deliveries from 35 significant ports of China surged 70,000 metric tonnes for the same period to reach 2.96 million metric tonnes.

Furthermore, developments across various provinces in China also supported the deliveries. For example, Tangshan lifted its heavy pollution level II emergency response, which further supported daily average deliveries from various local ports.

ASX-listed Iron Ore Stocks

The fundamental setup of demand and supply across China propelled iron ore prices on the global front, leading to a sentiment splash in ASX-listed iron ore stocks.

BHP Group Limited (ASX:BHP) gaped up ~ 1.71 per cent to start the session at $36.760 while climbing to an intraday high of $37.560 (11:46 PM AEDT).

Likewise, Rio Tinto Limited (ASX:RIO) started the session on ASX ~ 0.66 per cent higher to climb an intraday high of $101.140 (11:46 PM AEDT), maintaining its uptrend for the third consecutive trading session.

Out of its peer group, Fortescue Metals Group Limited (ASX:FMG) observed a price extreme after a phase of small consolidation with prices jumping to an intraday high of $18.000 (11:46 PM AEDT) after gapping up ~ 1.41 per cent higher against its previous close on ASX.

 

 


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