Ground Breakers: Iron ore giants pull market lower as Asian steel futures tumble

Mining stocks trip up on lower commodity prices with iron ore the biggest culprit
Asian steel and iron ore futures have fallen sharply this morning, leading FMG, Rio and BHP to heavy losses
IGO enjoys new lease on nickel life as it completes $3.87 a share cash deal to buy Western Areas

Mining and energy stocks are proving a heavy anchor on the ASX today as falling demand in Covid-hit China and months-low iron ore prices hit the Pilbara majors hard.

Fortescue Metals Group (ASX:FMG) fell 6.99% at 12pm AEST, while MinRes (ASX:MIN) was off 6.31%, Rio Tinto (ASX:RIO) tumbled 5.06% and BHP (ASX:BHP) lost 4.92% of its value to lead the Materials sector to a 3.76% loss.

It came despite a decent run in other areas like industrials, real estate and financials, with gold and lithium stocks also coming off the boil.

Evolution Mining (ASX:EVN), Northern Star (ASX:NST) and Pilbara Minerals (ASX:PLS) slid 5.96%, 5.52% and 4.76% respectively.

Dalian iron ore futures gave a taste of the disappointment due for big mining stocks, falling 9.5% this morning to US$113/t, with Singapore futures down 7.4% to US$111.15/t, down from levels in excess of US$150/t only a few weeks ago.

Benchmark 62% iron ore spot prices in Northern China fell 5.76% to US$121.64/t on Friday according to Fastmarkets MB, their lowest price since December 17.

It has come amid falling profitability for Chinese steel mills, which have seen stockpiles rise as Covid cases have delayed an expected recovery in infrastructure and property investment.

Coking coal and coke futures also fell towards the 10% downward limit on the Dalian exchange, with rebar futures sharply lower on the Shanghai Futures market.

The Shanghai Metals Market says 10 blast furnaces in and around Tangshan, a major steel producing city, will be placed on maintenance from the end of the June to July to ride out the current margin squeeze.

Ground Breakers share prices today:

IGO completes Western Areas deal

IGO’s (ASX:IGO) ~$1.3 billion cash deal to acquire WA nickel rival Western Areas is done, placing IGO as the owner of Australia’s next major nickel mine.

The Odysseus mine near Leinster, part of the Cosmos nickel complex once valued at $3.1 billion in X-Strata’s top of the market 2007 takeover of Jubilee Mines, is due to open by the end of the year.

IGO says the deal will be cash flow accretive from the 2024 financial year once the Odysseus underground development is fully ramped up.

It will give IGO a long life nickel asset to add to its portfolio of battery metals mines, including the shorter life Forrestania nickel mines from Western Areas, Nova nickel mine and a roughly quarter share of the Greenbushes lithium mine.

“The acquisition of Western Areas marks another important milestone for IGO as we continue to grow. Completion of this transaction enhances our position as a leading, independent producer of products critical for a clean energy future,” IGO managing director Peter Bradford said.

“I am also delighted to welcome the Western Areas team to the IGO family and am looking forward to working together as part of a strengthened IGO.”

IGO is also looking to work with one time WSA shareholder and WA mining billionaire Andrew Forrest on a study into a downstream nickel sulphate plant with the longer production life of Western Areas’ portfolio addressing concerns over its runway at the depleting Nova asset.

IGO’s larger balance sheet will de-risk the ramp up of Odysseus, but Cosmos also boasts the larger scale but lower grade Mt Goode deposit as well, where IGO will continue a pre-feasibility study started by its previous owner.