Iron ore, copper price plunge brings carnage to mining stocks

By Frik Els / April 12, 2017 / / Article Link

Mining and metals investors were offloading the sector's big names on Wednesday after sharp drops in iron ore and copper prices over worries about the robustness of the Chinese economy and heightened tensions surrounding North Korea with President Trump sending an "armada" of US warships to the region.

While gold was setting fresh 2017 highs on the back of safe haven buying, on the Comex market in New York copper for delivery in May fell nearly 3% to $2.5345 a pound or $5,588 a tonne, wiping out the metal's gains for the year.

Nickel was hardest hit among base metals, dropping 4% to a day low of $9,702, while zinc and tin are now trading 13% and 8% below their 2017 highs set in February and January. Lead has held up best and is still sporting double digit year to date gains at $2,237 a tonne.

Iron ore has suffered a terrible week with the benchmark assessment falling 18% in value since last Wednesday to $67.90 a tonne as record stockpiles and the threat of a restart of domestic Chinese mines put the steelmaking raw material under pressure.

Nickel was hardest hit on the day, dropping 4% while zinc and tin are now trading 13% and 8% below their 2017 highs

The bearishness spilled over to the sector heavyweights with investors rushing for the exits and booking gains on stocks that have enjoyed huge run-ups since the summer of 2016.

Shares in world number one BHP Billiton (NYSE:BHP) lost 4.7% in New York amid a battle with a major shareholder demanding the $91 billion Melbourne-based company spin off its oil business.

Vale (NYSE:VALE.P), the world's top iron ore producer, fell 4.2% in New York. The Rio de Janeiro-based company which also holds the second spot for nickel production is worth $44.8 billion and is holding onto double digit gains this year.

The world's second largest miner based on revenue Rio Tinto (NYSE:RIO) declined 5.2% in New York affording it a market cap of $73 billion. The Melbourne-HQed company is the world's number two iron ore producer and number seven copper producer with output of 523kt last year.

Anglo American (LON:AAL, OTCMKTS:NGLOY) gave up 5.2% in New York, coming close to erasing year to date gains for the world's fourth largest diversified miner.

The Phoenix-based company revealed that a dispute with the Indonesian government has cost it $1 billion in revenues

Top listed copper producer Freeport-McMoRan (NYSE:FCX) plunged 5.5% after the Phoenix-based company revealed that a dispute with the Indonesian government has cost it $1 billion in revenues since mid-January.

The government of the Asian nation imposed a concentrate export ban from Freeport's Grasberg mine as it renegotiates the company's licence and ownership conditions. Freeport which last year produced 1.7m tonnes of copper is now worth $18.7 billion on the NYSE.

High-flyer Glencore (LON:GLEN) was also marked down, losing 3.3% in trading on the London stock exchange, but the Swiss mining and trading giant is still sporting one-year gains of more than 100%. Glencore is the world's third largest copper company in terms of output with production of 1.3m tonnes last year, but with little exposure to iron ore escaped some of the carnage.

Glencore is also benefitting from being a major producer and top trader of coal. Coking coal is trading near record highs above $300 a tonne due to storms in Australia severely affecting supply while seaborne thermal coal was trading at $80 a tonne this week compared to less than $50 a tonne at the beginning of 2016.

Southern Copper (NYSE:SCCO) stock took a 3% hit on Wednesday after the latest round of talks between unions and the world's number three copper producer failed. Around 80% of the company's capacity will go offline due to the strike.

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