Steel, Iron-ore Miners Fall as Evergrande Approaches Crisis Point
By Dhirendra Tripathi
Investing.com – Stocks of steel and iron-ore producers took a knock in global markets Monday on fears over the cascading impact of the crisis unfolding at real estate developer China Evergrande (OTC:EGRNY).
ADRs of ArcelorMittal (NYSE:MT) fell 5.5%, BHP (NYSE:BHP) 5.4%, Rio Tinto (NYSE:RIO) 6% and Vale (NYSE:VALE) 3% in Monday’s premarket trading on the NYSE. Elsewhere, Anglo American (LON:AAL) fell 7% in London and Fortescue Metals closed (ASX:FMG) 4% lower in Sydney.
Evergrande shares fell more than 10% to touch their 11-year low in Hong Kong trading as the beleaguered developer began to sell its assets at hefty discounts. Traders stayed jittery as China’s second largest property developer has a bond interest due Thursday, according to Reuters.
There are concerns that a default on its $300 billion of liabilities could crystallize broader risks in China's financial system.
Shares of metals and iron-ore have lately been under pressure as the world’s biggest consumer attempts to limit its steel output at last year’s level of around 1.05 billion tons. According to UBS, output is likely to be near 1.07 billion tons in 2021-22 and flat in 2022-23. This is around 5% lower than its previous forecast of 1.13 billion tons.
Also weighing on markets more broadly is uncertainty ahead of a suite of central bank meetings this week. most notably at the U.S. Federal Reserve.
The Fed begins its two-day meet Tuesday. All eyes are on the central bank’s likely commentary on the timeline of the tapering. According to Reuters, market consensus is that it will stick with broad plans to begin stimulus withdrawal this year but will hold off providing details on a timeline for at least a month.
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