Key indicators you should watch out for in the iron ore industry (Part 1 of 11)
The iron ore industry
The iron ore industry is affected by a number of factors, like demand and supply, growth, and the growth stage of world economies.
Of all economies, China consumes the most iron ore and constitutes about two-thirds of seaborne iron ore imports. So various China-related factors affect the iron ore industry most significantly.
On the supply side, Vale SA (VALE) from Brazil and Rio Tinto (RIO) and BHP Billiton (BHP) from Australia are the major companies affecting the supply side of the equation.
Year-to-date, iron ore prices have fallen ~29%. This is mainly because of increased supply from the four major iron ore companies and weaker-than-expected demand from China. We’ll discuss the reasons for these trends in the next part of this series.
We’ll discuss various demand and supply indicators that you can track to get a sense of the iron ore industry’s performance.
On the supply side, we’ll talk about production and future supply plans for major companies as well as exports from a major port in Australia.
On the demand side, we’ll look at factors like China’s inventory levels, steel production, iron ore imports, and PMI.
Moving towards a broader context, we’ll talk about factors like the credit situation and real estate market, which have a fall-out impact on demand and supply for steel and ultimately iron ore. Finally, we’ll look at iron ore futures and see how they move with current industry dynamics.
Most of these indicators are published monthly, while some are reported weekly or quarterly. You should look at them collectively. They offer clues about the direction of iron ore prices and ultimately share prices for companies like Rio Tinto (RIO), BHP Billiton (BHP), Vale SA (VALE), and Cliffs Natural Resources (CLF)—as well as ETFs like the SPDR S&P Metals & Mining ETF (XME).
Browse this series on Market Realist:
- Part 2 - Why iron ore port inventory is marginally lower at Chinese ports
- Part 3 - Why iron ore exports at Port Hedland hit a record high in July
- Part 4 - Must-know: Why Chinese steel production is growing steadily
- Basic Materials Industry