Iron ore price pain drags Fortescue and BHP shares to fresh lows not experienced in nearly two years

Renewed fears about China’s waning steel demand has pushed the market values of two WA iron ore mining giants to a nadir not seen since 2022. On Wednesday shares in Fortescue fell 4.6 per cent to $17.32 and BHP’s lost 2.8 per cent to $39.60. The stock price of both companies is now at the lowest point since the first week of November 2022. Fortescue has lost 41 per cent since the start of the year, BHP has shed 22 per cent and the other Pilbara iron ore goliath — Rio Tinto — is down 18 per cent. Combined, this equates to more than $100 billion worth of lost shareholder value. The iron ore spot price slumped below the crucial $US100 per tonne barrier on Wednesday morning, sitting at $US98.35/t, which means nearly $US40/t has been wiped out from the steelmaking commodity since the start of 2024. Steel demand has been badly impacted by a weakening property sector and sluggish manufacturing activity in China. On Tuesday evening the chairman of industry heavyweight Baowu Steel said China’s steel market is facing a “severe winter”. The country’s steel market is by far the world’s largest and is where the overwhelming majority of WA’s iron ore exports go. The market faced considerable headwinds after financial crises in 2008 and 2015, but in both instances the Chinese government injected considerable stimulus to get the industry back on its feet. But it appears President Xi Jinping is reticent to hand over funds to bail out the steel producers this time, according to Bloomberg. Many analysts are expecting the iron ore price pain will only get worse. “We have a hard time understanding why iron ore is still managing to just hang onto $US100 (per tonne),” Westpac’s head of commodity and carbon strategy Robert Rennie said in a note to clients this week. “Iron ore prices should be in the mid-to-late $US80s given the absolute carnage going on in steel markets quietly in the background. “Markets are completely ignoring the fundamentals which continue to flash significant warning signs, so it’s just a matter of time before the market really wakes up.”