市场见解

Iron ore price surges 17% as Evergrande fears ease further

Chinese property development giant, Evergrande appears to have staved off disaster … for now.
The post Iron ore price surges 17% as Evergrande fears ease further appeared first on The Motley Fool Australia. –

The iron ore price and the S&P/ASX 200 Index (ASX: XJO) are flying today after fears of an impending collapse of the Chinese property developer, China Evergrande Group subsided in the market.

Overnight, the material required for steel manufacturing rocketed 16.8% to US$108.70 per tonne. The ASX 200 also had a rip-roaring day and was trading up 1.18% just before the market close this afternoon.

Let’s take a closer look at today’s news.

Evergrande staves off collapse … for now

The big boost in the iron ore price was likely spurred by news that Evergrande would make good on the interest payment it owes bondholders today. Many analysts had been forecasting a possible default, putting pressure on iron ore prices.

As reported on Tuesday, Evergrande is due to pay roughly US$83.5 million (AU$116 million) of interest on its 5-year dollar bond today. Since then, the company has pledged to make a bond payment this week but did not specify how much interest would be paid on it.

This has allayed fears that the company could collapse and cause widespread damage to the global economy.

As my Motley Fool colleague Bernd has already reported today, AMP Capital Chief Economist, Shane Oliver doesn’t expect Evergrande is about to go through its own “Lehman moment” (referring to the collapse of Lehman Brothers in the US during the GFC in 2008). He says Chinese authorities are unlikely to let that happen.

At the moment, they want to send a message to property developers not to take on too much debt, he believes.

Oliver says:

At the end of the day, they will support their economy. Not with a bailout for China Evergrande, but some sort of restructuring … which minimises the fallout.

Iron ore price snapshot

Despite the rally in iron ore prices overnight, the commodity hasn’t had it good in recent times. Since the beginning of the year, the price of iron ore has fallen 35%.

In fact, since peaking at over US$220 per tonne, the iron ore price has more than halved.

The BHP Group Ltd (ASX: BHP) share price, 力拓集团 (ASX: RIO) share price and Fortescue Metals Group Limited (ASX:FMG) share price have all suffered heavy falls that roughly correspond with the falling iron ore price.

BHP shares are 14% lower in just a month. Rio Tinto shares are down 8% and FMG shares are down 21%.

The post Iron ore price surges 17% as Evergrande fears ease further appeared first on The Motley Fool Australia.

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More reading

Bank of America flags more headwinds for ASX 200 iron ore shares

AMP Capital’s chief economist on Evergrande and ASX 200 resource shares

Top broker tips Fortescue (ASX:FMG) share price to rise 36%
Fortescue (ASX:FMG) share price jumps 4%, iron ore back above US$100 a tonne
Should investors buy Fortescue (ASX:FMG) shares in September 2021 for the 16% dividend yield?

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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