FMG, BHP and Rio Tinto share prices plummet as panic spreads

Rarely do markets move in straight lines — all too often are they interrupted by events that are outside of anyone’s scope to predict, control or contain.

Indeed, as new instances of coronavirus emerge across the globe and panic spreads – markets and communities have already begun to feel the impact. Bloomberg, for example, reported on Monday night, that ‘iron ore futures extend losses to 6% on virus spread concerns.’

Besides commodities, equity markets across the globe have tumbled in the last few days. The ASX 200 plunged as much as 112.7 points when the markets re-opened today, the FTSE collapsed 173 points and the S&P500 fell more than 1.5% yesterday.

As investors fled risk assets, bonds rallied strongly in response.

According to Alec Young, MD of Global Markets Research at FTSE Russell – this all comes down to uncertainty.

Here, Mr Young said:

‘Markets hate uncertainty, and the coronavirus is the ultimate uncertainty – no one knows how badly it will impact the global economy. China is the biggest driver of global growth, so this couldn’t have started in a worse place.’

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Chinese equity markets are not expected to re-open until 3 February.

Iron ore price in focus

Taking a step back, on 24 January, Fastmarkets Metal Bulletin reported that:

‘Seaborne iron ore prices were rangebound on Friday 24 January while the week-long Chinese New Year holiday starts, but market participants who were still working believe that the outlook is bearish with the ongoing fears of the coronavirus not being contained.’

Taking a broader perspective, Hellenic Shipping News, commenting on the coronavirus’ potential impact on iron ore markets, said:

‘It will, however, only become a problem for iron ore and steel demand if it spreads far enough to make an impact on China’s construction season, which tends to start in earnest after the Lunar New Year break.’

If equity markets are anything to go by – looking particularly at the broad declines of Australia’s big three mining companies today – market participants have potentially already decided that it is a problem.

Rio Tinto, FMG and BHP share prices all fall

All up, Australia’s mainstay iron ore miners were some of the worst performing ASX stocks today – as China’s significance, as it specifically relates to Australia’s iron ore exports – likely weighed heavily on traders and speculators.

Around 80% of Australia’s iron ore exports are China-bound, after all.

Fortescue Metals Group Ltd (ASX: FMG) bore the brunt of this uncertainty today, with its share price collapsing as much as 7.97% in the first two hours of trade.

Yet speaking to FMG’s truly spectacular share price run-up in the last 12-months, even when factoring in today’s decline – the stock is still up around 128% – over the last year.

BHP Group and Rio Tinto Limited also witnessed broad declines today – though faring better than FMG – their share prices still dropped as much as 3.71% and 3.63%, respectively.

At the time of writing, BHP traded at $38.95 per share, while Rio Tinto’s share price hit $99.43 – a little after noon.

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