ASX slides for 4th day, Why iron ore price forecast is set to fall by 2023: ASX closed 0.5% lower

Market Reports

by Melissa Darmawan

The Australian sharemarket closed in the red for the fourth day pressured lower by mining stocks on the backdrop of reporting season.

The three major mining players, BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue Metals (ASX:FMG) have reaped from the tailwinds of the rising iron ore prices following a surge in demand in China. Last year, the iron ore price was trading above US$200 a tonne which saw these mining giants payout monster dividends to shareholders.

Now the wheels have turned and the outlook appears grim after these giants hit their 52-week high around a month ago. Iron ore prices are set to suffer their biggest monthly loss as China curbs on carbon emissions through reining in their limits on the output of steel. This means, choking the demand for the ingredient.

Shares in BHP tumbled for their fifth session in a row, sliding 6.4 per cent to a six-month low of $44.67. Rio Tinto has notched a nine-month low falling 5.7 per cent at $107.17 while the single commodity producer is at risk, Fortescue Metals sunk 6.1 per cent at $20.13.

Nevertheless, the Office of the Chief Economist (OCE) expects prices to ease from their current highs over the second half of 2021 but not to fall below US$100 per tonne until late in 2022 and average US$90 per tonne in 2023.

The OCE expects iron ore prices to ease, as production increases in Australia and Brazil over the remainder of 2021 following seasonal weather disruption in January-March. They also forecast demand from China to decrease due to government interventions and tighter control of Chinese steel exports.

It warns however that any attempt by Beijing to constrain Australian imports of iron ore could lead to higher-than-expected prices. Australian exports of coal and other commodities have been constrained from entering China since the second half of last year as diplomatic tensions between the two countries continue.

At the closing bell, the S&P/ASX 200 was 0.5 per cent or 38 points lower at 7,465.

Local economic news

Last month, June’s jobless rate fell to its lowest level since December 2010 as another 29,100 joined the workforce.

Today, the Australian Bureau of Statistics reported the jobless rate dropped by 0.3 percentage points to 4.6 per cent in July.

There were 2,200 new jobs added into the economy with the participation rate, lower by 0.2 percentage points. Hours worked fell by 0.2 per cent from last month while the underemployment rate increased by 0.4 percentage points to 8.3 per cent.

Company news

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Origin Energy (ASX:ORG) dived to a loss of $2.29 billion for their full-year as the rise in clean energy smashed prices across the business amid the Covid-19 pandemic. 

Investment manager Perpetual (ASX:PPT) recorded a 31 per cent surge in revenue to $640.6 million for the financial year 2021, underpinned by solid inflows from ESG-focused Trillium and Barrow Hanley.

NRW Holdings (ASX:NWH) revealed a 26 per cent fall in their full year profit at $54.3 million from a year ago but have assured investors that their outlook ahead looks bright. 

At the closing bell, the S&P/ASX 200 was 0.5 per cent or 38 points lower at 7,465.

Futures

The Dow Jones futures are pointing to a fall of 140 points.
The S&P 500 futures are pointing to a fall of 17 points.
The Nasdaq futures are pointing to a fall of 54 points.
The SPI futures are pointing to a fall of 44 points when the market next opens.

Best and worst performers

The best-performing sector was Health Care, up 1.95 per cent. The worst-performing sector was Materials, down 3.7 per cent.

The best-performing stock in the S&P/ASX 200 was Redbubble (ASX:RBL), closing 18.95 per cent higher at $3.64. It was followed by shares in NRW Holdings (ASX:NWH) and Chorus (ASX:CNU).

The worst-performing stock in the S&P/ASX 200 was Codan (ASX:CDA), closing 8.3 per cent lower at $16.18. It was followed by shares in Sims (ASX:SGM) and Mineral Resources (ASX:MIN).

Asian markets

Japan's Nikkei has lost 1.1 per cent.
Hong Kong's Hang Seng has lost 1.6 per cent.
China's Shanghai Composite has lost 0.3 per cent.

Commodities and the dollar

Gold is trading at US$1777.29 an ounce.
Iron ore is 4.6 per cent lower at US$153.39 a ton.
Iron ore futures are pointing to a fall of 6.9 per cent.
Light crude is trading $1.22 lower at US$63.99 a barrel.
One Australian dollar is buying 71.88 US cents.

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