Bulk Buys: Majors stay bullish on bulks, even as fears circle

Majors remain bullish about iron ore investments, even in the face of economic uncertainty in the USA and China.

Sometimes you have to trust in the bulk. Pic: Getty Images

• Rio Tinto flags US$13bn Pilbara cash splash in iron ore vote of confidence

• Big miners continue to see price support for Australia's cash cow

• Coal prices lag, but they may not have much further to fall

The large end of town remains committed to big investments in iron ore even as fears swirl over prices.

Iron ore has hovered below US$100/t for several days, with bearishness setting in from investors in the wake of Trump's tariffs, which have stoked fear that steel and iron ore demand could crater in an already beaten down Chinese economy.

China's GDP growth hit 5.4% in the first quarter, beating estimates, if you can believe the CCP's data.

But that was followed by the worst factory contraction since December 2023, as the imposition of what eventually became 145% tariffs on the Middle Kingdom from the USA curbed demand for Temu lawn ornaments and knock-off barbie dolls in the States.

Dropping to 49 from 50.5, the shift of the official PMI into contraction mode was a worrying sign.

Still, iron ore giants are optimistic. Rio Tinto (ASX:RIO) CEO Jakob Stausholm said the company believed it had multiple levers to pull to avoid fallout from Trump's economic sledgehammer at the miner's AGM in Perth on Thursday.

Also building (part of) the 'Pilbara Killer' in Guinea known as Simandou, Rio remains bullish on the long-term outlook for its 335Mtpa Pilbara iron ore business, where it still harbours ambitions of growing to 360Mtpa over time.

Chair Dominic Barton lauded the investment the company had pumped into the Pilbara and planned to in the future.

"And in the Pilbara, our development pipeline extends well into the next decade and beyond with new mines and projects including Western Range, West Angelas, Hope Downs 1, Greater Nammuldi and Brockman 4 expansion," he said.

"In fact, over the next three years we expect to invest more than US$13.3 billion in new mines, plant and equipment in the Pilbara. This builds on about US$8.5 billion of investment in the region over the past three years.

"We’re also studying Rhodes Ridge, which may one day become the biggest iron ore mine built in Australia, potentially producing more than 100 million tonnes per annum. In fact, we are executing more projects worldwide than ever before; and the skills we are gaining as we do so are helping us improve our organisation overall."

Price floor

It's not the only large miner remaining positive on iron ore.

Beaten down Mineral Resources (ASX:MIN), which is facing a four-cornered assault in the form of corporate governance failings linked to founder and MD Chris Ellison, weak lithium prices, a highly leveraged balance sheet and ramp up issues at its Onslow Iron project in the Pilbara, remains stoic.

CFO Mark Wilson said on a call with analysts this week they saw price support for iron ore at US$90/t, saying partner Baowu, China's largest steelmaker, would happily take more of the low grade iron ore from the Onslow project if it could.

Getting it out may be the biggest problem, with the company forced to announce over $200m of additional capex this year to asphalt a haul road which faced weather damage in the wet season and has been subject to numerous truck incidents.

That's before it rolls out autonomous trucks in the years to come. Guidance was this week trimmed for FY25 to 8.5-8.7Mt from 8.8-9.3Mt. Its full runrate of 35Mtpa is forecast to be hit by Q1 FY26, and Wilson remains confident MinRes can get costs into the $40s.

That gives it a chance of competing on cost with majors like BHP (ASX:BHP), Rio and Fortescue (ASX:FMG), which saw costs drop 4% to US$17.53/t in the March quarter, essentially to preserve Onslow's long-term future if Simandou does cause a glut in iron ore pricing, or the bottom really falls out the Chinese steel industry.

Which is possible, though Commbank's Vivek Dhar noted last week it would need to fall some 6-7% – an never before seen drop – for prices of US$90/t and below to be sustained.

Back to Rio and its other key battle was waged and won at the twin London and Perth AGMs, albeit leaving the mining giant with a bloody nose.

Almost 20% of shareholders backed a resolution put to investors by activist investor Palliser Capital to initiate a review of its dual-listed company structure. Rio, which has trading entities in both Britain and Australia, is one of only a few public companies to retain the model, with rival BHP having collapsed its own back in 2022.

Rio didn't support the initiative, said it had looked into the matter itself and thought it would cost billions in tax liabilities, and require unprecedented levels of liquidity to come into the Aussie market to backfill the DLC's valuation. But it said it would continue to engage with shareholder in light of the size of the vote supporting Palliser's position.

Palliser fired some missives after the fight was waged:

"It is deeply disappointing that rather than adhering to “best practice” principles, the Board chose to launch a fierce campaign – involving a vast team of costly advisors and indefensible decisions such as initially disenfranchising the Australian line from voting – all to shield its closed door internal analysis of unification from scrutiny," Palliser founder and CEO James Smith said.

He doesn't think the idea, now seeded in the minds of investors, will go away with the vote.

"...we note a similar experience at BHP, where initial flawed arguments to protect an almost identical DLC structure – much like those now presented by Rio Tinto – ultimately gave way to a highly successful unification.”

ASX iron ore stocks

CODE	COMPANY	PRICE	WEEK %	MONTH %	6 MONTH %	YEAR %	YTD %	MARKET CAP
ACS	Accent Resources NL	0.008	0%	33%	33%	14%	33%	$ 3,785,018.26
ADY	Admiralty Resources.	0.004	-20%	-20%	-43%	-43%	-33%	$ 13,147,397.00
AKO	Akora Resources	0.12	0%	-6%	-8%	-20%	20%	$ 16,389,931.32
BCK	Brockman Mining Ltd	0.013	-13%	-13%	-28%	-46%	-19%	$ 129,923,249.83
BHP	BHP Group Limited	37.83	-1%	-3%	-12%	-11%	-4%	$ 193,852,143,454.65
CIA	Champion Iron Ltd	4.59	6%	-6%	-25%	-33%	-20%	$ 2,368,407,074.57
CZR	CZR Resources Ltd	0.255	-6%	-14%	11%	-7%	21%	$ 61,551,008.22
DRE	Dreadnought Resources Ltd	0.014	0%	0%	-13%	-18%	17%	$ 72,666,038.46
EFE	Eastern Resources	0.025	-7%	-11%	-29%	-64%	-11%	$ 3,278,338.62
CUF	Cufe Ltd	0.005	-17%	-17%	-29%	-58%	-50%	$ 6,732,874.33
FEX	Fenix Resources Ltd	0.285	-2%	-2%	6%	2%	8%	$ 211,226,192.19
FMG	Fortescue Ltd	16.18	4%	3%	-17%	-36%	-11%	$ 49,848,442,022.42
GEN	Genmin	0.035	6%	-20%	-30%	-68%	-13%	$ 31,942,299.67
GRR	Grange Resources.	0.195	3%	-5%	-20%	-51%	-11%	$ 231,467,739.60
HAV	Havilah Resources	0.175	0%	-10%	-13%	-24%	-22%	$ 59,369,851.80
HAW	Hawthorn Resources	0.047	-2%	-10%	-20%	-37%	15%	$ 14,740,686.97
HIO	Hawsons Iron Ltd	0.013	8%	-7%	-41%	-62%	-28%	$ 13,214,517.78
IRD	Iron Road Ltd	0.04	-5%	-20%	-38%	-50%	-32%	$ 33,147,711.00
JNO	Juno	0.023	0%	-8%	-12%	-62%	-8%	$ 4,812,452.13
LCY	Legacy Iron Ore	0.01	11%	0%	-20%	-39%	0%	$ 97,620,425.84
MAG	Magmatic Resrce Ltd	0.041	5%	-18%	-15%	-59%	37%	$ 16,264,977.85
MDX	Mindax Limited	0.075	-3%	29%	103%	121%	88%	$ 172,030,391.03
MGT	Magnetite Mines	0.115	0%	-8%	-28%	-59%	-4%	$ 13,309,545.04
MGU	Magnum Mining & Exp	0.005	25%	-17%	-58%	-67%	-44%	$ 3,237,445.61
MGX	Mount Gibson Iron	0.3	-3%	-10%	-6%	-32%	2%	$ 367,045,573.18
MIN	Mineral Resources.	20.74	14%	-13%	-49%	-71%	-39%	$ 4,046,318,056.36
MIO	Macarthur Minerals	0.027	4%	-13%	-52%	-64%	-41%	$ 5,191,303.26
PFE	Pantera Lithium	0.0155	11%	-3%	-26%	-58%	-14%	$ 7,106,755.32
PLG	Pearlgullironlimited	0.007	-22%	-22%	-59%	-73%	-56%	$ 1,431,792.53
RHI	Red Hill Minerals	3.31	0%	3%	-12%	-32%	-19%	$ 214,827,543.75
RIO	Rio Tinto Limited	115.9	1%	-1%	-4%	-10%	-1%	$ 43,469,418,659.40
RLC	Reedy Lagoon Corp.	0.002	0%	0%	0%	-50%	0%	$ 1,553,413.35
CTN	Catalina Resources	0.002	0%	-33%	-39%	-29%	-47%	$ 3,327,519.10
SRK	Strike Resources	0.035	-10%	3%	-3%	-50%	30%	$ 9,931,250.00
SRN	Surefire Rescs NL	0.003	-25%	0%	-40%	-70%	-14%	$ 7,248,923.44
TI1	Tombador Iron	0.35	0%	0%	0%	0%	0%	$ 30,213,639.40
TLM	Talisman Mining	0.165	6%	3%	-28%	-39%	-20%	$ 31,072,857.59
EQN	Equinoxresources	0.115	15%	5%	-18%	-43%	10%	$ 14,242,750.35
AMD	Arrow Minerals	0.023	-4%	-28%	-43%	-74%	-43%	$ 20,494,969.61
CTM	Centaurus Metals Ltd	0.36	-9%	3%	-18%	-8%	1%	$ 183,779,448.81
LM1	Leeuwin Metals Ltd	0.155	-18%	24%	112%	107%	11%	$ 17,641,117.20
M4M	Macro Metals Limited	0.011	0%	5%	22%	-31%	-8%	$ 39,774,175.28

Coal prices linger

Back to Dhar and he's taken a look over the coal market this week, with prices for thermal in particular crumbling to levels not seen since the days after the pandemic.

The 2022 coal boom is well and truly in the rear view mirror, with Newcastle grade energy coal closing the month at US$97.50/t.

That's already inspired some supply discipline, with Glencore announcing plans to trim production from its Cerrejon mine in Colombia.

Alongside strong supplies on the global market, Dhar said China's domestic output had lifted 8.1% through Q1, trimming the manufacturing giant's reliance on imports.

"China’s self‑sufficiency in thermal and coking coal is estimated at ~95% and 80‑85% respectively, helping explain why a modest uptick in China’s coal output has such a pronounced negative impact on China’s coal import demand," he said.

"China accounted for 36% and 33% of global thermal and coking coal imports last year, respectively."

"The ongoing weakness in thermal coal prices can also be attributed to weaker demand in Asia as a relatively mild winter has resulted in high inventories. The high level of inventories also reflects energy security concerns."

Lower LNG prices haven't helped (utilities often flip between which is cheaper to run).

But Dhar believes it's hard to see thermal coal prices falling further, with 10-15% of production now lossmaking.

"Prices may therefore track more sideways in the near term, with Chinese stimulus being a key positive catalyst in the near term."

Steelmaking coal may disappoint, though supply disruptions have pushed prices up in recent weeks.

"Premium coking coal prices of $US200/t (FOB Australia) may be more realistic by the end of the year than our forecast of $US230/t, particularly if China’s steel output contracts by ~2% again this year and China’s domestic coal production holds up," Dhar said.

At the very least, a number of Australian players have shown they have the metal to weather weak prices.

Stanmore Coal (ASX:SMR) trimmed costs and cut capex to maintain margins, as well as pushing FID on its proposed Eagle Downs development in Queensland into 2026.

Whitehaven Coal's (ASX:WHC) results were well-received after it closed the sale of a 30% stake in the Blackwater mine to two Japanese steelmakers for US$1.08bn, while New Hope Corp (ASX:NHC) was running at bottom quartile cost levels in the first half of FY25 of just $55.5/t free on rail, down 23.5%, delivering a half year NPAT of $340.3 million.

Yancoal Australia (ASX:YAL) added $136m in cash in the March quarter to take its bank balance to $2.6bn, ahead of a final dividend payout worth $687m, while Curragh mine operator Coronado Global Resources (ASX:CRN) is the hard luck story among the large caps.

Its shares have fallen 77% YTD, to a market cap of just $286m, as it reported a 32.8% drop in revenue YoY, pledging $100m in capital savings and cost reductions over the rest of the year to wade out the storm.

ASX coal stocks

CODE	COMPANY	PRICE	WEEK %	MONTH %	6 MONTH %	YEAR %	YTD %	MARKET CAP
NAE	New Age Exploration	0.004	0%	0%	-33%	33%	14%	$ 10,637,595.64
CKA	Cokal Ltd	0.035	-8%	3%	-55%	-67%	-42%	$ 33,447,418.38
BCB	Bowen Coal Limited	0.35	9%	-30%	-56%	-94%	-56%	$ 37,176,356.82
SVG	Savannah Goldfields	0.025	14%	67%	36%	2%	36%	$ 21,742,759.30
AKM	Aspire Mining Ltd	0.24	-6%	-17%	-13%	7%	-6%	$ 119,294,691.48
AVM	Advance Metals Ltd	0.056	-2%	19%	22%	134%	65%	$ 11,985,950.70
YAL	Yancoal Aust Ltd	4.95	2%	-3%	-25%	-11%	-24%	$ 6,575,788,396.26
NHC	New Hope Corporation	3.74	3%	1%	-25%	-18%	-25%	$ 3,102,381,152.88
TIG	Tigers Realm Coal	0.003	0%	0%	0%	-25%	0%	$ 39,200,107.10
SMR	Stanmore Resources	1.97	3%	-7%	-39%	-38%	-35%	$ 1,753,206,728.13
WHC	Whitehaven Coal	4.94	2%	-8%	-29%	-36%	-20%	$ 4,174,637,912.16
BRL	Bathurst Res Ltd.	0.73	-3%	-6%	4%	-13%	-2%	$ 175,181,804.75
CRN	Coronado Global Res	0.175	-22%	-47%	-83%	-85%	-77%	$ 326,908,477.35
JAL	Jameson Resources	0.025	0%	-32%	-51%	-19%	-38%	$ 15,268,333.05
TER	Terracom Ltd	0.062	-3%	-23%	-69%	-73%	-66%	$ 49,659,906.57
MCM	Mc Mining Ltd	0.08	-15%	-15%	-48%	-45%	-30%	$ 45,749,883.28
DBI	Dalrymple Bay	4.14	6%	8%	24%	48%	15%	$ 2,037,580,451.37
AQC	Auspaccoal Ltd	0.073	11%	49%	-42%	-16%	-27%	$ 50,433,666.55

Originally published as Bulk Buys: Majors stay bullish on bulks, even as fears circle