Double-digit falls expected for mining shares
Mining shares are likely to fall with Fortescue faring worst with potential losses exceeding 20% according to Wealth Within.
While China had imposed tariffs on certain imports from Australia, iron ore was currently excluded from this as it was an important resource for China.
This subsequently fed through to Australia’s miners, particularly smaller players Champion Iron and Grange Resources which had risen 134% and 120% respectively over the past year.
Dale Gillham, chief analyst at Wealth Within, said: “While China has imposed tariffs on other imports from Australia, it has stayed clear of iron ore, which indicates how important this commodity is to China and the growth of their economy in the future. Given the billions our government rakes in from the sale of iron ore to China, no doubt they would not want China’s demand for this commodity to slow, particularly given our ever-increasing account deficit”.
However, the price of iron ore fell in May as China indicated it wanted to diversify its suppliers which was impacting the larger miners such as BHP, Rio, and Fortescue Metals.
Since the start of the year, Fortescue returned just 1.9% while BHP and Rio had seen gains of 15.7% and 13.3% and Gillham said he expected them to fall further still.
“I anticipate BHP and Rio will fall in the vicinity of 10%-20% while Fortescue will likely suffer a larger fall. Following this, I believe these stocks will become great buying opportunities,” he said.
AUTHOR
Laura Dew
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