Iron ore strength spurs record share highs for Rio Tinto, BHP, Fortescue

Investors are positioning ahead of what is expected to be a bumper dividend season.

Australia’s biggest listed iron ore miners all hit new share price records on Thursday.

Australia’s biggest listed iron ore miners all hit new share price records on Thursday as the iron ore price rose slightly and investors positioned ahead of what is expected to be a bumper dividend season.

BHP shares hit $47.04 in intraday trading, bettering its May 2008 high of $46.72 after the benchmark iron ore price rose to $US168 a tonne this week. BHP shares eased to closed up 6.1 per cent at $46.90, well above the previous record closing price of $46.30.

Rio Tinto also hit a record high intraday, at $126.10, closing at $125.66 compared with a previous record of $123.12 in 2008. After posting a $9.90, or 8.6 per cent, gain for the day, Rio Tinto was the biggest mover on the S&P/ASX 200 index for the day.

Fortescue Metals again hit a fresh high intraday, at $26.14, closing at $25.92 but still up 87c, or 3.5 per cent, for the day.

The resurgent iron ore price comes as a “blue wave” result in Georgia’s Senate run-off votes spurs expectations of major infrastructure spending in the US.

And the metal’s rise is despite ongoing jawboning of the market from China, after its Ministry of Industry and Information Technology joined attempts to dampen the outlook this week, releasing a policy document suggesting China would seek to control more of its own supply of iron ore by 2025.

The industry ministry released a draft blueprint for its iron ore and steel industry early this week, flagging a desire to control at least 45 per cent of the iron ore used by its steel industry by 2025, including at least 20 per cent of seaborne imports.

China currently imports about 70 per cent of its iron ore supply, and owns or controls only a minimal proportion of that figure. But, combined with recent moves by Chinese companies in African iron provinces, the draft blueprint suggests China could again be pushing towards a form of resources nationalism.

The draft ministry document was released only a week after its Minister, Xiao Yaqing, flagged cuts to Chinese crude steel output in 2021, telling a conference audience in late December the country’s steel sector must “resolutely” reduce crude steel output and ensure a year-on-year decline in production, after its mills produced more than 1 billion tonnes of crude steel in 2020.

Those comments led to an immediate hit to iron ore futures traded on Singaporean and Chinese exchanges but — like mid-December threats by the China Iron & Steel Association to involve Chinese regulators in the iron ore price, amid a fresh round of unsubstantiated allegations of market rigging by the majors — the comments did little to dampen the price of a commodity that remains in strong demand.

Iron ore futures traded on the Singapore exchange were steady on Thursday, down US17c to $US164.82 a tonne by the evening, but the most active contract traded on China’s Dallian exchange was up 1.6 per cent.

While iron stockpiles in China remain at healthy levels, down about 3 million tonnes from November highs of about 124 million tonnes, the prospect of seasonal disruption from major Australian and Brazilian producers has not slowed buying or the recent price surge.

Exports from Australian mines lifted to 79.6m tonnes in December, according to Bloomberg data, as Australia’s major producers took advantage of good weather to lift shipments ahead of the Pilbara cyclone season.

Meanwhile, Australian oil and gas companies were also among the market’s biggest movers, after Saudi Arabia pledged to cut oil production by a million barrels a day from February in a bid to top support oil prices and keep OPEC’s fragile alliance with Russia over oil production alive.

The “voluntary” production cut sent oil futures up on Wednesday, flowing through into local stocks, already buoyant as a cold winter in north Asia sent gas prices up.

The cold winter and a supply shortfall have driven LNG spot prices in north Asia to the highest levels in six years, topping $US15 per million British thermal units early in the year, after they fell to below $US2/BTU in June 2020.

Santos shares added 8 per cent on Thursday, gaining 48c to close at $6.95. Woodside Petroleum shares closed up $1.17, or 5 per cent, to $24.35, with Beach Energy up 6.5c to $1.895 and Cooper Energy up 0.5c to 39c.