Iron ore plunges on China virus fears

Iron ore futures plummeted 8.5pc over two days to a two-month low amid fears China’s coronavirus will hit steel demand.

Fortescue Metals Group chief executive Elizabeth Gaines. The miner’s shares face another volatile day.

Iron ore futures have plummeted 8.5 per cent over two days amid fears China’s coronavirus will hit steel demand.

The price of the key Australian export fell over two days by $US7.76 a tonne to a two-month low $US83.27 in Singapore with a clampdown by China to curb the outbreak seen trimming demand for the metal.

It later recovered by about 1 per cent to $US84.15 a tonne.

Public transport was suspended until further notice on Tuesday in China’s biggest steelmaking centre, Tangshan, as part of Beijing’s response to battle the deadly outbreak.

In Shanghai, authorities advised companies not to restart work until at least February 9, while markets are now shut until Monday when pricing for iron ore in China will resume.

Australian miners may face another volatile day, particularly billionaire Andrew Forrest’s Fortescue Metals Group, which shed 7.3 per cent of its value on Tuesday.

Fortescue shares have surged by 61 per cent in the last five months despite iron ore prices moderating by about a third over the same period.

“In the space of a year Fortescue has gone from cheapest miner to most expensive - for how long,” Shaw & Partners analyst Peter O’Connor asked on Wednesday.

Adding to tensions, the miner’s biggest shareholder Hunan Valin Iron and Steel Group has cut its stake in Fortescue to 10.15 per cent from 11.8 per cent as part of an exchangeable bond set up in 2016.

“The bonds have recently matured and a number of bondholders have exercised their exchange right,” Fortescue said in response to analyst and media speculation.

“Valin has transferred Fortescue shares that it previously held to those bondholders, therefore reducing Valin’s reported shareholding.”

Rio Tinto and BHP may also face pressure after dropping 3.1 per cent and 3.3 per cent respectively on Tuesday on broader gloom around commodity demand.