Vale Sees Year-on-Year Drop in Iron Ore Production in...

Vale’s iron ore output decreased by 20.99 percent year-on-year in the aftermath of the Brumadinho disaster.

November 12th, 2019

Vale May Lose Newly Acquired Ferrous Resources

The iron ore mining company must provide the Brazilian government with the appropriate documents if it...

November 7th, 2019

Rio Tinto Has High Hopes for Iron Ore in...

Diversified miner Rio Tinto has upped its iron ore shipment guidance for 2020 by 5 percent,...

October 31st, 2019

Samarco Sets Sights on 2020 to Resume Operations

After four years of lawsuits and red tape, the Brazilian iron ore mine run by Vale...

October 28th, 2019

Fortescue Reports Strong Quarter After Iron Ore’s Hot Summer

The iron ore company increased its cash flow and was able to reduce its net debt...

October 24th, 2019

Iron Ore Prices Cool from Summer Highs

Despite the slowdown, prices for the base metal are still up year-on-year and year-to-date.

October 16th, 2019

5 Top Weekly TSX Stocks: Base Metals Companies Lead...

The top-gaining stocks on the TSX last week were Anglo Pacific, Imperial Metals, Wesdome Gold Mines,...

September 29th, 2019
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Iron is one of the Earth’s most abundant elements, and, because of its strength and low cost, it has many applications. However, the metal’s top use by far is in the production of steel. Rocks and minerals from which iron can be economically extracted are called iron ores. These ores are usually rich in iron oxide and come in a range of colors. The iron in such ores is usually found in the form of magnetite or hematite, but can also be found in other forms. Obtaining iron from iron ore is a complex process, and companies that mine iron ore tend to sell the material they mine as it is. Prices for iron ore have suffered in recent years,...

Iron is one of the Earth’s most abundant elements, and, because of its strength and low cost, it has many applications. However, the metal’s top use by far is in the production of steel.

Rocks and minerals from which iron can be economically extracted are called iron ores. These ores are usually rich in iron oxide and come in a range of colors. The iron in such ores is usually found in the form of magnetite or hematite, but can also be found in other forms.

Obtaining iron from iron ore is a complex process, and companies that mine iron ore tend to sell the material they mine as it is. Prices for iron ore have suffered in recent years, but some investors remain optimistic about the base metal and wonder how they can enter the market to benefit from its advantages. Read on to learn more about the space and how to start investing in the metal.

Investing in iron ore: Supply and demand

Australia is the largest producer of iron ore by far, with Western Australia’s Pilbara region being a notable hotspot for the commodity. Its output came in at 900 million metric tons (MT) of usable iron ore in 2018, or 560 million MT of iron content, says the US Geological Survey’s most recent report on iron ore.

Other major producers in the iron ore mining industry include Brazil, China and India.

Unlike most commodities, the majority of iron ore trades under contracts in which major counterparties negotiate annual changes in prices. In recent years, oversupply paired with lower than expected demand from the Chinese steel industry has made things difficult for the industry and has put major downward pressure on the iron ore price.

In fact, activity in China has traditionally been the key driver of global iron prices, given that it is the world’s largest producer, user and exporter of steel. Along with concerns about a slowdown in Chinese growth, ongoing and seemingly escalating global trade disputes have weighed on the price of iron ore.

While the iron ore market has been weak for the past year, there is no doubt that there will always be demand for steel, as it is used heavily in infrastructure, transportation and manufacturing, and is necessary for economies worldwide to remain productive and function.

As the population grows, demand for steel will likely make a comeback and even out the current supply glut. Of course, this equilibrium will also rely on what the big miners do moving forward.

Investing in iron ore: Consider stocks

Investing in iron ore producing companies is the main way investors gain iron ore exposure. In recent years, smaller iron ore producers and iron ore exploration companies have struggled to stay afloat due to low prices for the commodity.

As a result, investors have gravitated toward the world’s largest iron ore mining companies, such as Vale (NYSE:VALE), Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), BHP (ASX:BHP,LSE:BHP,NYSE:BHP) and Fortescue Metals Group (ASX:FMG,OTCQX:FSUGY).

For those considering iron ore investment opportunities, these majors may be a good place to start.

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