• Commbank thinks iron ore prices will fall to US$100/t this year
  • CBA mining expert Vivek Dhar says a contrating Chinese property sector will hurt iron ore and steel demand
  • Thermal coal hovers around US$200/t ahead of reporting season, but coking coal is continuing its 2023 comeback

Iron ore bulls have been vindicated so far in 2023, with China’s reemergence from its vicious cycle of Covid lockdowns bringing traders back to the table to send prices beyond US$120/t.

Singapore futures lifted 1.68% yesterday to US$122.40/t.

It is a positive signal for Australia’s biggest miners ahead of their financial results reports, starting tomorrow with Andrew Forrest’s Fortescue Metals Group (ASX:FMG).

Capex and decarbonisation spending could begin for the first time to cut into dividends, but analysts suggest payouts to investors will still be strong.

“The DecQ updates have, in aggregate, resulted in negative revisions to FY23 EPS/FCF estimates and capital management expectations into Feb results and given ongoing supply chain and cost uncertainty, those with upcoming project capex may soften interim dividend payments. Nevertheless, we continue to expect capital management to remain elevated (given strong FCF and balance sheets),” RBC’s Kaan Peker said in a note yesterday.

Will iron ore stay this bullish throughout 2023? Many analysts aren’t so sure of that.

Commbank’s mining and metals guru Vivek Dhar says a boost in infrastructure construction in China, where CBA expects economic growth to lift from a paltry 3% in 2022 to 5.5% in 2023, will not be enough to offset a continued contraction in its belaboured property sector.

“New housing starts is the key indicator to watch for steel demand from China’s property construction sector. New housing starts (measured in floor space) plummeted ~40% in 2022 and is likely to remain in contractionary territory in 2023,” he wrote in a note to clients.

“However, the rate of contraction is likely to ease from 2022 to 2023, likely signalling that the worst is likely over for China’s property‑related steel demand.”

 

Contraction still expected

The worst being over may help sentiment, but Dhar says total steel demand will still fall.

“Policymakers have looked to ease credit conditions for China’s property developers,” he said.

“China’s 16‑point property rescue package released last year indicates how policymakers have turned more supportive to the property sector.

“It is still anticipated though that steel demand from China’s property construction sector will contract notably again in 2023. And the extent of contraction is expected to be steep enough to bring down China’s total steel demand by 0‑2% in 2023.

“Weaker Chinese steel demand should weigh on China’s steel output and iron ore consumption. We think weaker Chinese iron ore demand, combined with a modest uplift in seaborne iron ore supply will weigh on iron ore prices through 2023.

“We think prices will drift lower to $US100/t in coming months.”

 

ASX iron ore stocks

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CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
ACS Accent Resources NL 0.025 0% 0% -40% -55% $ 11,650,682.08
ADY Admiralty Resources. 0.01 0% 43% 11% -52% $ 11,732,212.38
AKO Akora Resources 0.165 3% -11% 0% -54% $ 11,911,384.65
BCK Brockman Mining Ltd 0.022 -15% 0% -21% -64% $ 241,286,035.41
BHP BHP Group Limited 47.72 -1% -4% 23% 11% $ 242,500,830,015.72
CIA Champion Iron Ltd 7.2 -1% -6% 44% 1% $ 3,677,243,125.86
CZR CZR Resources Ltd 0.215 -3% -9% -14% 62% $ 49,974,713.52
DRE Dreadnought Resources Ltd 0.094 -10% -10% 1% 135% $ 309,610,452.68
EFE Eastern Resources 0.018 6% -5% -47% -67% $ 22,355,036.30
CUF Cufe Ltd 0.018 -8% 13% -14% -58% $ 16,423,910.21
FEX Fenix Resources Ltd 0.265 -2% 0% -16% 6% $ 154,802,908.80
FMG Fortescue Metals Grp 22.18 1% -3% 17% -3% $ 68,168,283,284.52
FMS Flinders Mines Ltd 0.465 -1% 4% -2% -10% $ 78,514,588.31
GEN Genmin 0.2 0% 0% -20% 0% $ 64,687,570.00
GRR Grange Resources. 1.05 0% 12% -13% 26% $ 1,197,845,552.43
GWR GWR Group Ltd 0.057 -7% -8% -39% -65% $ 18,630,565.99
HAV Havilah Resources 0.36 3% 0% 7% 100% $ 110,823,723.50
HAW Hawthorn Resources 0.095 -1% -21% 8% 0% $ 31,826,483.24
HIO Hawsons Iron Ltd 0.069 -9% -27% -78% -64% $ 63,425,883.22
IRD Iron Road Ltd 0.105 0% -9% -28% -45% $ 84,360,817.91
JNO Juno 0.1 0% 5% -20% -13% $ 14,922,380.11
LCY Legacy Iron Ore 0.016 -6% -6% -18% -11% $ 102,509,219.18
MAG Magmatic Resrce Ltd 0.095 -14% 0% 9% -3% $ 28,735,123.01
MDX Mindax Limited 0.059 0% 0% 0% 40% $ 115,533,663.12
MGT Magnetite Mines 0.74 70% 51% -49% -57% $ 58,016,229.89
MGU Magnum Mining & Exp 0.022 -8% -15% -51% -70% $ 16,212,204.79
MGX Mount Gibson Iron 0.58 0% -6% 14% 5% $ 716,507,406.47
MIN Mineral Resources. 87.03 -2% -2% 47% 70% $ 17,258,756,826.50
MIO Macarthur Minerals 0.165 10% 6% -18% -57% $ 27,332,825.52
PFE Panteraminerals 0.115 -12% -23% -18% -43% $ 6,180,134.40
PLG Pearlgullironlimited 0.043 -17% 54% 26% -24% $ 6,569,482.00
RHI Red Hill Minerals 4.72 0% 10% 38% 38% $ 299,992,300.30
RIO Rio Tinto Limited 121.5 -1% -1% 27% 0% $ 45,407,167,296.48
RLC Reedy Lagoon Corp. 0.009 -10% -18% -47% -70% $ 5,100,476.41
CTN Catalina Resources 0.009 -18% 0% -10% -57% $ 12,384,868.92
SRK Strike Resources 0.084 -7% -5% -38% -33% $ 23,835,000.00
SRN Surefire Rescs NL 0.013 -7% -13% -24% -19% $ 22,929,770.42
TI1 Tombador Iron 0.024 -4% -14% -20% -37% $ 51,287,576.95
TLM Talisman Mining 0.165 3% -3% 5% -8% $ 30,977,017.01
VMS Venture Minerals 0.025 0% -11% -22% -38% $ 42,400,982.21
EQN Equinoxresources 0.2 3% 60% 18% -9% $ 9,000,000.20
AMD Arrow Minerals 0.006 20% 20% 33% 9% $ 15,202,590.56
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Thermal coal wobbles as miners enter reporting season

Also expected to deliver strong dividends to shareholders this reporting season, coal miners have had a topsy turvy start to the week.

They were Monday’s big winners, with thermal coal futures running back above US$200/t after a dramatic fall from levels of around US$400/t at the start of 2023.

The ICE February contract dropped 2.26% to US$221/t yesterday, with the March contract down US$7.25 to US$198.75/t.

It’s been a different case this year for metallurgical coal, with steelmaking coal recapturing its traditional big premium to energy coal.

Coking coal futures, stirred in part by news Chinese customers were buying Australian cargoes for the first time in over two years and hopes of a recovery in the steel market after a big contraction last year, were up 0.4% Monday to US$374/t.

 

ASX coal stocks

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CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
NAE New Age Exploration 0.007 -7% -22% -13% -56% $ 10,051,292.37
CKA Cokal Ltd 0.19 -3% -5% -12% 12% $ 174,168,061.30
NCZ New Century Resource 0.85 -3% -2% -55% -57% $ 111,905,184.30
BCB Bowen Coal Limited 0.28 -5% -8% -8% 22% $ 504,585,632.65
SVG Savannah Goldfields 0.185 -8% 3% -8% -31% $ 34,936,961.03
GRX Greenx Metals Ltd 0.71 -3% -10% 154% 246% $ 182,606,734.08
AKM Aspire Mining Ltd 0.057 -12% -19% -30% -33% $ 30,965,856.09
AVM Advance Metals Ltd 0.01 0% -23% 0% -41% $ 5,800,440.69
AHQ Allegiance Coal Ltd 0.015 -32% -64% -86% -96% $ 17,083,230.79
YAL Yancoal Aust Ltd 5.64 -9% -9% 8% 70% $ 7,473,687,213.42
NHC New Hope Corporation 5.41 -12% -13% 23% 109% $ 4,764,255,175.80
TIG Tigers Realm Coal 0.013 -19% -28% -28% -24% $ 169,867,130.78
SMR Stanmore Resources 3.57 -3% 9% 59% 225% $ 3,217,932,661.86
WHC Whitehaven Coal 7.91 -8% -10% 19% 150% $ 7,051,769,636.73
BRL Bathurst Res Ltd. 0.94 6% 12% 4% 21% $ 174,137,399.80
CRN Coronado Global Res 2.11 -2% 4% 32% 66% $ 3,386,436,534.60
JAL Jameson Resources 0.081 -10% -10% -5% 8% $ 31,712,399.10
TER Terracom Ltd 0.76 -11% -22% -7% 176% $ 628,758,494.48
ATU Atrum Coal Ltd 0.005 -17% -29% -33% -76% $ 8,350,195.03
MCM Mc Mining Ltd 0.235 -8% -43% 43% 225% $ 89,478,357.53
DBI Dalrymple Bay 2.47 -2% 0% 12% 23% $ 1,249,319,400.84
JAL Jameson Resources 0.081 -10% -10% -5% 8% $ 31,712,399.10
TER Terracom Ltd 0.76 -11% -22% -7% 176% $ 628,758,494.48
ATU Atrum Coal Ltd 0.005 -17% -29% -33% -76% $ 8,350,195.03
MCM Mc Mining Ltd 0.235 -8% -43% 43% 225% $ 89,478,357.53
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