Iron-ore price fall hits mining stocks

The iron-ore price hit a record high of over $235 a tonne in May. But it has since fallen to below $100, sparking a sell-off in mining stocks.

“China’s moves to rein in its mammoth steel industry have roiled [iron ore] markets this year,” say Krystal Chia and Yuliya Fedorinova on Bloomberg. Global iron-ore prices hit a record high in May; contracts for spot (immediate) delivery to north China soared to over $235 a tonne. Since then, they have slumped by around 60%, falling below $100 a tonne for the first time in a year.

The turmoil in the real-estate sector has played a minor role in the latest slump. However, the underlying cause of both boom and bust is the Chinese government’s attempts to curb steel production in order to reduce power consumption, cut carbon emissions and – most pressingly – improve air quality ahead of the Winter Olympics next year. Hence the industry saw iron-ore prices “spiking in the first half as [steel] mills rushed to front-load volumes ahead of additional production restrictions being rolled out”, followed by the recent rout as demand dried up.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.