over 2 years ago • 1 min
In a world where seemingly every commodity is heading to the moon, one stands out for all the wrong reasons: iron ore.
Even as aluminum (shown in blue on the chart above) hits a 13-year high and natural gas and coal surge, iron ore (in pink) has halved over the past two months.
Iron ore’s price, which jumped 70% last year and another 40% through May, has come back to earth with a bump. The ore is mainly used to make steel and China, the world’s biggest steel producer, is currently pushing mills to cut production in an effort to curb carbon dioxide emissions and ensure clear skies before the Beijing Winter Olympics.
The situation is being exacerbated by collapsing steel demand from China’s property industry. China Evergrande, a cash-strapped real estate firm involved in about 1,300 projects in 280 cities, is currently struggling to reassure creditors it won’t have to default on its $300 billion in debt – casting a pall over the entire sector.
If you believe iron ore will rebound from its current slide, there’s a fairly small exchange-traded fund (ETF) listed in Hong Kong that tracks its price: the SSIF DCE Iron Ore Futures Index ETF (ticker: 9047). Otherwise, you can buy shares in mining companies Rio Tinto and Vale, the world’s two biggest producers of iron ore. But, as the chart below shows, Rio and Vale may have some way to fall yet before they fully price in the iron ore decline.
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