Miners feel coronavirus fears
Large mining groups Fortescue Metals, BHP Billiton and Rio Tinto, have all suffered losses this year as concerns linger over the effect of the coronavirus and how it could hinder trade between Australia and China.
The spread of the coronavirus was first announced by China in early January and led to the declaration of a ‘global emergency’. So far, there have been 15 cases reported in Australia.
In efforts to contain the virus, there were travel restrictions placed on China and those who had visited the region in recent weeks were asked to quarantine themselves for 14 days.
However, Australia was a significant trade partner to China with its biggest export being iron ore. This increased in recent months to record levels thanks to a dam disaster in Brazil, owned by Brazilian miner Vale, which reduced Brazilian iron ore exports.
The worst affected company would be Fortescue Metals, headquartered in Western Australia and the world’s fourth-largest iron ore producer, which is a ‘core supplier’ to China and opened a new office in Shanghai in January. BHP Billiton and Rio Tinto were also major sellers to the country.
Since 22 January, when the World Health Organisation issued a statement on the virus, Fortescue Metals’ share price fell 13% while Rio Tinto fell 8.7% and BHP Billiton dropped by 6.4%, according to FE Analytics.
However, over one year to 13 February, 2020, the companies have all seen positive returns with Fortescue returning 106%. Smaller gains were seen for Rio Tinto and BHP Billiton at 18.5% and 12.4% respectively.
Performance of Fortescue Metals, Rio Tinto and BHP Billiton over three months to 13 February, 2020
AUTHOR
Laura Dew
Recommended for you
BlackRock has announced its plan to acquire real estate investment firm ElmTree Funds which will be integrated into its new private financing solutions business.
With share price growth of 45 per cent for FY25, Australian Ethical has shared why it believes the firm has done so well compared to its active peers.
ETF investors would be wise to consider global or European exposure for their equity ETF allocations, according to AXA IM, with US government action expected to hit both its equity and bond performance.
A specialist ETF provider is seeking to become “the new Betashares” with its active ETFs, thanks to its use of algorithms to achieve outperformance.
