Australian sharemarket sinks into the red as iron ore miners tumble on commodity price collapse
The Australian sharemarket was dragged down by the ongoing iron ore price plunge weighing heavily on miners, while a tech firm sank after being left at the altar.
The benchmark S&P/ASX200 index closed 0.76 per cent lower at 7403.7 while the All Ordinaries Index fell 0.73 per cent to 7702.9.
“Today’s losses can be almost solely blamed on the iron ore miners, which are coming under a lot of pressure, and this is after the iron ore price fell by around 6 per cent in the past day to $US106 per tonne,” CommSec analyst Steve Daghlian said.
“It’s a far cry from the $US233 per tonne high hit in the middle of May.
“We’ve actually seen iron ore prices fall by about $US126 or 54 per cent from those levels.”
Major investment bank UBS predicts the price will fall below $US100/t by the end of this calendar year and average $US89 per tonne in 2022 as supply exceeds demand.
It has downgraded its rating for Fortescue to sell, from neutral, sending the miner’s shares plunging 11.48 per cent to a 14-month low of $15.27.
UBS maintained its respective sell and neutral ratings on Rio Tinto and BHP.
Rio Tinto shares dropped 4.7 per cent to $98.80 - falling below $100 for the first time since November - while BHP slid 3.67 per cent to $39.16, a level last seen in December.
“Keep in mind that iron ore prices did more than double over a 12-month period just up until recently, so that was a reason why some of these miners have been hitting record (share price) highs and also posting stronger profits and record dividends as well,” Mr Daghlian said.
“It also doesn’t cost them very much to dig up iron ore ... on average the unit cost for digging up each tonne for BHP, Rio and Fortescue is still below $US20 per tonne at the moment.”
Iron ore producer Mineral Resources backtracked 8.53 per cent to $48.26, a level last seen in June.
Another poor performer was Whitehaven Coal, which on Thursday was granted environmental approval for its Vickery Extension Project in NSW, down 6.77 per cent at $2.89, while fellow coal miner New Hope retreated 4.43 per cent to $2.16.
A softer gold price explained Evolution Mining slipping 3.32 per cent to $3.79, Northern Star declining 2.83 per cent to $9.27 and Newcrest losing 3.1 per cent to $23.78.
Financial technology company IRESS plunged 10.72 per cent to $12.08 after Swedish private equity group EQT walked away from its takeover offer of $15.91 per share.
EQT Asia Pacific chairman Thomas Von Koch said the company had “not come across any red flags during our due diligence but were not able to sufficiently confirm our investment hypothesis”.
IRESS chair Roger Sharp said his firm’s aim remained to double net profit by 2025, with potential for further upside.
Engineering-led construction group CIMIC gave up 2.26 per cent to $19.92 despite winning a contract for airside civil and pavement works at Western Sydney International (Nancy-Bird Walton) Airport.
AMP shares continued their downward trajectory, dipping 1 per cent to an all-time closing low of 99 cents, a day after media reports that its bid find a new manager for a $7bn office fund run by AMP Capital had been rocked by the resignation of three high-profile independent advisers.
It also announced on Thursday a small shareholding sale facility allowing investors who hold less than $500 of shares to get out without incurring any brokerage costs.
Crown Resorts announced after market close on Thursday that yet another director was marching amid its money laundering scandal, with Antonia Korsanos advising she won’t seek re-election at the annual general meeting on October 21.
Crown shares added 0.53 per cent to $9.51.
ANZ dipped 0.6 per cent to $27.70, Commonwealth Bank inched three cents higher to $102.88, National Australia Bank shed 1.1 per cent to $27.89 and Westpac declined 0.46 per cent to $25.88.
OMG chief executive Ivan Tchourilov said it had been a giddy week for the ASX, which ended up just 3 points lower, its second straight weekly decline.
“Commodity volatility has shaken the market with record highs for rare earth metals and record lows for iron ore,” he said.
“Weather conditions in the Gulf of Mexico blew in a pinch in oil supply and spike in its price, while gold went every which way.
“The market is officially moving from the year that was, to the year that will be, and there’s looking to be dramatic change.
“Materials were Openmarkets’ most sold sector for the week, and diversified financials the most bought.”
In economic news, the Australian Bureau of Statistics released experimental estimates of quarterly tourism employment and jobs to help explain the impacts of Covid-19 on tourism activity, showing there were 675,600 jobs in the sector June.
This was 10,000 (1.5 per cent) more than in March this year and 69,100 (11.4 per cent) more than in June last year, representing almost 1 in 20 filled jobs in the economy.
The Aussie dollar was fetching 73.12 US cents, 52.98 British pence and 62.08 Euro cents in afternoon trade.
Originally published as Australian sharemarket sinks into the red as iron ore miners tumble on commodity price collapse
Get the latest news from thewest.com.au in your inbox.
Sign up for our emails