BlackRock cools on iron ore outlook
Funds manager BlackRock sold down close to $60 million worth of shares in iron ore stocks last Thursday, in a series of transactions that coincided with iron ore suffering its biggest price fall since June. Australian pure-play iron ore miners Fortescue Metals and Atlas Iron were the main targets, while smaller parcels of shares in Rio Tinto and Brazilian miner Vale were also sold down.
BlackRock sold 10.8 million Fortescue shares - more than 10 per cent of its stake in the miner - for close to $40 million.
That sale came before Fortescue revealed a joint venture with a Taiwanese steel maker that was roundly applauded as a good result for the miner. BlackRock also sold down close to 6 per cent of its stake in Atlas, and smaller stakes worth millions of dollars in both Rio and Vale.
While BlackRock retains significant shareholdings in all four companies, the sell-down adds fuel to the debate over whether the iron ore price will repeat last year's spring slump, when it plummeted to $US86 a tonne in September.
A surge to $US142.80 in recent weeks has prompted some miners and investment bankers to speculate that there won't be a slump this spring, particularly given iron ore inventories in China remain low.
The view is not shared by UBS commodities analyst Tom Price, who believes Chinese steel makers will soon start curtailing production, which will translate into weaker demand for iron ore.
Mr Price has predicted the price will fall as low as $US70 a tonne for a few panicked days between now and the end of October.
BlackRock's stake in BHP Billiton - a company that also counts iron ore as its biggest money spinner - remained unchanged, which may be a nod to BHP's more diversified portfolio.
BHP will report its full-year result for the year to June 30 on Tuesday and is tipped to post an underlying profit of about $US12.6 billion. Investors will look for guidance on whether BHP intends to go ahead with spending on the Jansen Potash project in Canada.
Frequently Asked Questions about this Article…
BlackRock sold down a portion of its iron ore exposure after recent volatility and a sharp iron ore price fall. The sell-down — worth close to $60 million in total — is a clear signal the fund manager was trimming risk on iron ore amid uncertainty about whether prices will repeat last year’s spring slump.
BlackRock sold large parcels in Australian pure-play miners Fortescue Metals and Atlas Iron, and smaller stakes in Rio Tinto and Brazilian miner Vale. Its stake in BHP Billiton remained unchanged.
BlackRock sold 10.8 million Fortescue shares — more than 10% of its Fortescue stake — for close to $40 million. It also trimmed close to 6% of its Atlas Iron holding and disposed of smaller stakes worth millions in Rio Tinto and Vale, bringing total sales to about $60 million.
Yes. Although BlackRock trimmed positions, the article notes it still retains significant shareholdings in Fortescue, Atlas, Rio Tinto and Vale despite the sell-down.
The sell-down adds weight to the debate over the iron ore outlook. Some market participants see the recent pullback as a cautionary sign that prices could fall again, while others point to low Chinese inventories and recent price strength as reasons to expect stability.
UBS commodities analyst Tom Price warned Chinese steelmakers may soon curtail production, reducing iron ore demand. He predicted prices could temporarily drop as low as US$70 a tonne for a few panicked days between now and the end of October.
Yes. After BlackRock’s Fortescue sale, Fortescue revealed a joint venture with a Taiwanese steel maker that the article says was widely applauded as a good result for the miner.
Investors should watch BHP Billiton’s full-year result for the year to June 30, due on Tuesday. The company is tipped to post an underlying profit around US$12.6 billion, and investors will be looking for guidance on whether BHP intends to go ahead with spending on the Jansen Potash project in Canada.
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