When investors took a first look at the Australian stock market this morning, they would have noticed a fall of 0.75% in the ASX200, which dropped even lower heading towards midday, with at least one of the influential factors being sell offs in two major mining companies, Fortescue Ltd (ASX:FMG) and BHP Group Ltd (ASX:BHP).
By 15:30 AEDT, Fortescue had slumped 9.73% – positioning shares at $18.37 – while BHP shares were trading at $41.42, a drop of 1.55%.
The story behind the first was a bit Agatha Christie: as an unknown institutional investor was reported as having sold off $1.9 billion worth of stock after the close of trading on Monday.
Meanwhile, BHP’s news was seemingly more positive, as it had joined Canadian company Lundin Mining Corporation in acquiring explorer Filo Corp, setting up a joint venture with the former to advance the Filo del Sol copper-gold-silver project on the border of Argentina and Chile.
Fortescue under pressure
Fortescue shares have been on the downward trend since Monday, interpreted as a response to last Thursday’s quarterly report which showed the company under pressure due to rising costs of mining iron ore in the WA Pilbara – with predictions of a unit price rise in the range of 1 and 9% in the next year.
This was somewhat balanced by the news that sales volumes were also on the way up, with Fortescue reaching record shipments of 53.7 million tonnes in the fourth quarter of the 2024 Financial Year – a 10% rise from the same quarter last year – with a total of 191.6 million tonnes shipped in the FY 2024 overall.
But newsflow from the company has been a mixed-to-negative bag for a while, with Fortescue cutting 700 jobs earlier in July amid rumours that chief Andrew Forrest was abandoning his plans to invest in green hydrogen, as his business connected to this – FFI (Fortescue Future Industries) – was brought back under the main company umbrella.
Before that, the company had been on the recovery track following derailment of an ore car in December which had weakened shipment numbers in the third quarter of FY 2024, with these tracking 6% lower than the prior corresponding period the previous year.
BHP pinning hopes on copper
Meanwhile, when the other mining giant released its quarterly activities report two weeks ago, the data was quite positive, including iron ore production at record levels, and the highest production of copper in more than 15 years – at 504.9 kilotonnes overall for the fourth quarter of 2024 FY – with contributions from two Chilean mines.
One – Escondida – in fact reported the highest production in four years, while the other mine – Spence – was also breaking records for the year.
And today’s news of BHP’s investment in Filo del Sol is further evidence of the company leaning into the red metal – underscored by its attempt to takeover Anglo American Plc earlier in the year – and despite a downturn in price, driven by concerns about Chinese demand.
The commodity backdrop
Today, copper sat just above US$4.00 a pound, part of a sharp downturn which has brought it to the lowest price in almost four months.
Beijing’s decision not to pump stimulus measures into the economy – as evidenced during its Third Plenum earlier this month – in addition to its prioritisation of advanced technologies and new energies (ahead of construction and industry) prompted the selling off of assets and base metals contracts.
This same lack of stimulus – and the underlying weakness of the Chinese property market – was also hitting iron ore prices, which fell below US$107 per tonne – the lowest level in a month – with the price now tracking below US$106.59 per tonne.
In any case, BHP’s continued investment in copper assets points to its belief in the base metal – and its production story is certainly rosy – but we may have to wait and see how Fortescue’s news flow develops, and how this may weigh on markets into the near future.