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Iron ore plunge sends shockwaves through markets

Monday marked a significant reversal for major banks following Friday’s surge, but the real concern for the local market emerged with a nearly 7% plummet in iron ore prices across Asia. This downturn triggered further declines in the shares of industry giants BHP, Rio Tinto, and Fortescue, compounding their losses from the previous week.

Investor anxiety heightened upon learning that Chinese portside iron ore stocks had surged to 141 million tonnes, the highest level in almost a year. This surge led to a negative reaction among investors as prices slumped on the SGX market in Singapore.

The price of 62% Fe fines delivered to northern China experienced a sharp 6.8% decline from Friday’s close, settling at $107.35 per tonne—the lowest in six months. Moreover, there are concerns that it may soon test the $100 per tonne mark.

Benchmark futures prices have now witnessed a 20% decline since the close of 2023, when they stood at $135.31 per tonne. This decline comes after reaching a peak of over $142 per tonne in the first week of 2024.

This drop in iron ore prices triggered a chain reaction in the market, with shares of BHP, Fortescue, and Rio Tinto falling by 2.6%, 3.5%, and 3.6%, respectively. Although other sectors also experienced declines, it was the banking sector’s slide that primarily drove Monday’s worst slump in a year. The ASX 200 fell by 1.48%, or 142.8 points, to reach a seven-week low of 7704.2—a performance not seen since March 10 last year, when it lost 2.3%.

In a trading session following record highs for three of the four major banks on Friday (excluding NAB), Westpac shares saw a decline of 3.2%, NAB by 3.1%, Commonwealth by 2.7%, and ANZ by 1.9%.

Despite its market value dipping below $200 billion to close at nearly $198 billion, Commonwealth Bank’s value remains only $20 billion below that of BHP, which stands at $217 billion. Last Friday, Commonwealth Bank’s value of $204 billion was just over $18 billion shy of BHP’s market capitalization.