The below excerpt from our research department’s recent equity market update, provides some insight into the current weakness in the iron ore spot price and share prices for mining & mining service related companies.
Morningstar commented that “weak commodity prices continue to weigh on the Australian market with iron ore and coal, Australia’s most valuable exports, down about 60% from peak levels achieved during the resources boom… (we) see the (iron ore) market well supplied in the near to medium term .”
Longer-term Morningstar states “BHP Billiton and Rio Tinto are well placed to ride out the storm and consolidate their market shares”.
Chart 1 – Quarterly exploration expenditure for Iron Ore
Chart 2 – Australian Iron Ore Supply
Source: Morningstar – Australia and New Zealand Equity and Fixed-Income Market Outlook (8 October 2014).
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