Major miners fall as iron ore prices continue to sink

Supply and demand

 

The ongoing tariff turmoil has certainly not increased China's demand for iron ore as the country cuts back steel production.

 

And, as China's demand for iron ore diminishes, supply continues to increase.

 

Rio Tinto this month announced it had opened a new mine in Western Australia with the capacity to produce up to 25 million tonnes of iron ore per year.

 

Adding to oversupply concerns, Rio Tinto's massive Simandou iron ore project in Guinea is expected to begin shipments later this year.

 

Simandou is said to contain high-grade iron ore, estimated at around 1.5 billion tonnes, and is one of Africa's largest mining projects.

 

As such, downward pressure on the price of iron ore looks set to continue.

 

Bottom line

 

For years, shareholders have enjoyed solid returns from Australia's iron ore miners, particularly BHP, Rio Tinto, and Fortescue.

 

Iron ore, Australia's largest export, has also been a crucial ingredient fuelling the country's prosperity.

 

As such, it's not only the country's iron ore miners and their shareholders that will feel the impact of falling iron ore prices.

 

Still, the major miners are likely to take a hit as the value of the commodity sinks.

 

UBS is projecting that BHP's revenue could drop more than US$2 billion to US$7.6 billion in FY26.

 

Australia's Department of Industry, Science, and Resources is not expecting things to turn around anytime soon for the country's iron ore miners.

 

The Department's latest Resources and Energy Quarterly report forecasts Australia's iron ore export earnings to fall from around $117 billion in FY25 to about $109 billion in FY26.

 

Further declines could see export earnings drop to $81 billion in FY30, representing a decline of more than 30% from the FY25 figure.