A Steel Glut Is Killing This Commodity and Taking Some Stocks With It
Amanda Schiavo Amanda Schiavo Follow Gregory Morcroft Follow Apr 18, 2017 10:43 AM EDT
Get TheStreet Quant Ratings' exclusive 5-page report for (MT) - FREE.
Several iron ore producer stocks fell in Tuesday trading as the commodity used in making steel dropped to near six-month lows amid a glut of Chinese steel.
The price of iron ore fell by almost 5% to near a six-month low. The benchmark Australian ore for delivery to China was lower by $3.10 to $61.50 a ton, a slump by a third from two months ago when the price hit $94.5 a ton.
Iron ore traded as low as $38 a ton in 2015, which marked an eight-year low.
Citigroup sounded a note of caution in an April 17 note to clients, again, citing a slowdown in Chinese steel demand amid a global oversupply.
The markets may be unpredictable, but Jim Cramer can show you how to navigate it like a pro. Follow his blue-chip portfolio of stocks at Action Alerts PLUS. Join today and try it for 14 days—FREE!
"We maintain a bearish view on iron ore and highlight second-half risks, particularly on the slowdown of overall Chinese steel demand growth," Citi said in the report.
Citi has a price target somwewhere in the $50s for iron ore in 2018.
Shares of steelmaker Arcelor Mittal (MT) , which also has iron ore operations, fell 1.8% to $7.22, Vale (VALE) and BHP Billiton (BHP) , two of the largest producers, fell 2.8% and 0.5% respectively.