Ore miners are steeled for the worst

THE iron ore price continues to collapse as concerns over weaker demand from China mount, combining with a major broker downgrade to send Fortescue’s share price plummeting to a 14-month low.

Shares in the Andrew “Twiggy” Forrest-founded miner slumped 11.5 per cent to $15.27 on Friday, a level last seen in July last year.

It was the worst performer on the ASX 200.

That compares with the company’s all-time closing high of $25.78 in July this year.

The ASX 200 closed 0.76 per cent lower on Friday to 7403.7 points.

Rio Tinto shares slumped 4.7 per cent to $98.90 and BHP tumbled 3.7 per cent to $39.16.

It comes after the price of iron ore slumped below $US110 per tonne overnight on Thursday, a more than halving of the record $US233/t reached in May when Covid-19 stimulus programs fuelled infrastructure spending.

But Ord Minnett said the latest steel production data from China was down 13 per cent year-on-year.

UBS has now slashed its iron ore price forecasts for 2021-23 by about 10 per cent as it expects the market to be in surplus in coming months.

The major investment bank predicts the price will fall below $US100/t by the end of this calendar year and average $US89/t in 2022.

“We remain cautious medium term, as supply from the incumbents is set to lift, Guinea is set to add 100-200mt from 2025-26, and as steel scrap in China increasingly displaces iron ore demand,” UBS said.

It has accordingly downgraded its rating for Fortescue to sell, from neutral, and maintained its respective sell and neutral ratings on iron oreheavy diversified miners Rio Tinto and BHP.

ANZ Research said iron ore futures had also collapsed as concerns over weaker demand mount.

“Declining steel production in China, exacerbated by signs of stress in the property market, are weighing on sentiment,” it said.