New $5B Iron Ore Mine in the Works for...

Western Australia is poised to sign an agreement with a wealthy New Zealand family whose multi-pronged...

January 23rd, 2017

Iron Outlook 2017: Lower Prices Expected

Iron ore was the best performing commodity in 2016, but will it carry over to 2017?

January 5th, 2017

5 Top TSX Stocks: Index Rallies Over 15,000 Points

The index was up over 15,000 points last week for the first time in over a...

November 27th, 2016

Iron Ore Price Nudges $75

Volatility in the iron ore price continued on Tuesday as traders digested the latest news out...

November 23rd, 2016

Iron Ore Price Jumps Past $55 Per Tonne

Where are iron ore prices headed next?

July 5th, 2016

BHP Billiton Cuts Dividend By 74 Percent

For the first time in 27 years, BHP Billiton has cut its dividend payout, stating that...

February 23rd, 2016

2016 Outlook Free Reports

The Investing News Network has created a series of free reports for investors, reviewing 2015 highlights...

January 7th, 2016

Iron Price Forecast for 2016 and Onward

A look at the iron price forecast for the remainder of the year and what to...

December 7th, 2015

Iron Ore Stocks Round-Up

A look at iron ore stocks continuing to make progress despite the tough iron ore market.

November 19th, 2015

Iron Ore Market: Oversupply Continues to Hurt Iron Ore...

But some believe a rebound could take place in the next year or two.

November 4th, 2015
Iron is one of the most abundant elements on earth and is found in rocks and minerals in a variety of forms including magnetite, hematite, geothite, limonite and siderite. It is key in the construction of machinery, tools, automobiles, ships, buildings, etc., due to its strength and low cost. Because pure iron is very soft, it is most commonly used in the production of steel. Metallic iron is extracted from iron ore and its properties can be modified by alloying it with carbon and various other metals to create steels. Unlike most commodities, the majority of iron ore trades under contracts in which major counterparties negotiate annual changes in prices. Vale  (NYSE:VALE), the world’s largest iron ore miner, along with...

Iron is one of the most abundant elements on earth and is found in rocks and minerals in a variety of forms including magnetite, hematite, geothite, limonite and siderite. It is key in the construction of machinery, tools, automobiles, ships, buildings, etc., due to its strength and low cost.

Because pure iron is very soft, it is most commonly used in the production of steel. Metallic iron is extracted from iron ore and its properties can be modified by alloying it with carbon and various other metals to create steels.

Unlike most commodities, the majority of iron ore trades under contracts in which major counterparties negotiate annual changes in prices. Vale  (NYSE:VALE), the world’s largest iron ore miner, along with the other industry giants Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) and Australia’s Fortescue Metals Group (ASX:FMG) currently dominate the seaborne iron ore market and often set the price for the entire industry when they negotiate large supply contracts. These four companies have been flooding the market and attempting to push higher-cost producers out as they all continue to ramp up production despite the detrimental affects it has had on the iron ore price.

This oversupply pared with the lower-than-expected in demand from the Chinese steel industry has made things quite difficult for the industry to say the least and has put major downward pressure on the price. China, which is not only the top iron-producing country, but also the largest consumer of the metal, has had a difficult time as many of its mines operate at a higher cost than the spot price has been for some time now. Despite that, its production, which hit1,5000 million tonnes in 2014, is expected to remain strong in coming years.

Because of the lackluster price, keeping operating costs down is the key for miners in the space which can be difficult considering the capital investment that goes into a commercial iron ore mine, such as infrastructure including a railway system and heavy machinery.

Why invest in iron?

While the iron ore market has been very weak for the past two year, dropping by over 50 percent, there is no doubt that there will always be a demand for steel as it is used heavily in infrastructure, transportation and manufacturing and is necessary for an economy to to remain productive and function. As the population grows, the demand for more 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.

In spring of 2015, BHP decided to delay further expansion at Port Hedland, which gave the iron ore price a slight boost and not long after Vale reduced its iron ore production forecast by up to 30 million tonnes over the next two years. While neither caused any major change in the price, it signaled that these industry giants were at the very least attempting to alleviate the glut, while still remaining in a position to dominate the sector.

Get the latest Iron Investing stock information

Get the latest information about companies associated with Iron Investing Delivered directly to your inbox.

Iron Investing

By selecting company or companies above, you are giving consent to receive email from those companies. And remember you can unsubscribe at any time