What’s holding up iron ore equities?

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I’m still marveling at the strength shown by iron ore equities. Neither RIO nor FMG have corrected anything like they should. Indeed they continue to radically out-perform relative to history vis-a-vis the iron ore price. FMG is down only 20% this year, 4% less than the iron ore price itself:

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Rio is only down 12%, half that of the iron ore price:

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The market is trading on iron ore volume growth and productivity gains, not prices. I mean, shiiit, take a look at where FMG was mid last year when the iron ore price dipped but was much higher than today. If anything the prospects for FMG’s large output of sub-benchmark ore have diminished since then yet its share price is much higher and firmer.

It goes to show the significant role played by sentiment in equity prices.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.