Insights

Why the Fortescue and BHP share price are sinking this week

China takes aim against “unreasonably priced” commodity prices, sending the BHP Group Ltd (ASX: BHP) share price and iron ore miners lower
The post Why the Fortescue and BHP share price are sinking this week appeared first on The Motley Fool Australia. –

China’s most-traded iron ore futures tumbled as much as 8% on Wednesday to hit ~1,100 yuan/tonne. This comes as its state council vowed to curb the unreasonable rise in commodity prices. Consequently, the BHP Group Ltd (ASX: BHP) share price slumped 3.42% on Wednesday, while the Fortescue Metals Group Limited (ASX: FMG) share price shed a similar 3.14%. 

The fall has continued today. At the time of writing, the BHP share price is trading 1.51% lower to $48.06. At the same time, Fortescue is down 0.22% to $22.78. 

China to stabilise its commodity market 

Steel, iron ore, and copper prices have surged in the last 12-months. This has been fueled by an increase in global liquidity, supply-side constraints, and post-lockdown recoveries. China has been a driving force behind the uplift in commodity prices, with commodity hungry investments in sectors such as technology, infrastructure, and transport. 

According to a statement released after a State Council meeting, China will look to strengthen the management of both supply and demand-side factors to curb “unreasonable” increases in commodity prices and prevent the pass-through to consumers. 

The meeting reported a focus on adjustments on trade and stockpiling, reinforced inspections on behaviours that bid up prices, and a crackdown on malicious trading. 

The country also urged coal producers to lift production to meet peak demand in summer. 

This caused China’s iron ore futures to tumble as much as 8%, with other materials including coking coal, thermal coal, hot-rolled coil, and steel rebar futures to slide between 5.5% and 6.8%. 

Is the Fortescue and BHP share price in trouble? 

The Fortescue and BHP share price are arguably iron ore price proxies. With iron ore surging to never before seen prices, iron ore miners have followed suit, soaring to all-time record highs alongside market-leading dividends. 

China’s policies are still in its early days, with iron ore prices still sitting at record levels, above US$200/tonne. 

To add some perspective, iron ore prices were fetching around US$160/tonne at the start of the year. In September 2020, they were fetching US$120/tonne and US$90/tonne before COVID-19 hit in March last year. Iron ore prices have truly come a long way. 

Earlier in March, China took aim against its industrial hub, Tangshan, with new emission policies put in place to limit or halt production. This saw the BHP share price tip to $44 in late March. However, it wasn’t long before its shares regained losses to set a new all-time record high of $51.82 by 11 May. 

Clearly China’s announcements can have an immediate push pull effect on Fortescue and BHP shares, or rather, market sentiment towards ASX iron ore miners. However, it may not necessarily have an effect on iron ore prices in the short to medium term. 

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

More reading

ASX 200 sinks, EML plunges, Appen soars

Should ASX iron ore producers worry as China plans to up its own production?

These iron ore miners are outperforming the BHP (ASX:BHP) share price in 2021
CSL (ASX:CSL) share price backtracks despite renewed optimism
Why BHP, EML Payments, Laybuy, & St Barbara are sinking today

The post Why the Fortescue and BHP share price are sinking this week appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!