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Iron is an ancient metal and it’s still one of the most-used metals in the world. Strong and malleable, almost 98% of mined iron ore is used to make steel. It’s mined in about 50 countries, with Australia and Brazil dominating the export market. In 2019 Australia mined a huge 919 million tons and 37.5% of the whole world production, followed by Brazil with 405 million tons and China with 340 million tons.
Ways to invest in iron stocks
If you’re keen to jump in and start investing in iron ore, you have several options. You can invest through a share dealing account, ISA or a pension scheme.
Once you’ve chosen your investing platform you can start thinking about which fund, commodity or stock you want to buy.
Here are the steps involved in setting up a share dealing account:
- Pick a share dealing platform and create an account.
- Add money to your account using a bank transfer, debit or credit card.
- Search out iron ore stocks or ETFs on your platform, and then submit a buy order.
Invest in iron ore ETFs
ETFs or exchange traded funds can help you to diversify your investment and spread your risk. There are two main types of metal ETF: some track an underlying precious metal index and invest in metal futures, and others invest in a wide range of metal mining companies. Here are some pros and cons of investing in iron ore through an ETF:
- ETFs are a low cost way to invest in commodities as they tend to have lower fund charges than other managed funds.
- Your investment will be diversified across many different companies or across various metal futures.
- ETFs invest in many underlying stocks or metals so you lose some of the control over your investment.
- You may not be able to invest in a purely iron ore ETF. For example, some metals ETFs track the S&P Custom Precious Metals and Mining Index which includes many different metals.
Invest in iron stocks
Investing in iron-mining companies is one of the most simple ways to invest in iron ore.
- Low investing costs as you’ll own the stocks directly
- You can pick individual companies you like and have control over your investment.
- You can select stocks that line-up with your investing goals or ethics eg. you may want to avoid companies that invest in Russia.
- Small iron-mining companies have a high risk of failure if the iron ore price collapses.
- Investing in individual shares is less diversified than investing through an ETF.
Invest in iron ore futures
Investing in iron ore futures is complicated and risky. It means you’re committing to buy iron ore in the future for a set price. If prices go up, then you’re quids in, but if they go down you’ll still be committed to buy at the agreed price.
Here are some pros and cons:
- You can make big returns if the prices swing in your favour.
- You’ll have direct ownership over your investments.
- You could lose a lot of money if your predictions are wrong.
- Not all platforms offer the option of investing in metals futures.
3 iron stocks to consider
Rio Tinto is another well known mining titan with mines across the globe, including Australia, South Africa, Canada and the United States. As well as iron ore, Rio Tinto mines copper, nickel, aluminium and diamonds. As of 14 March 2022, the share price is up 1.5% in the last 6 months and up 53.4% in the last 5 years. The mining giant has a market cap of $112.7 billion and shareholders enjoyed a dividend yield of 10.9% in 2021.
BHP is a global mining giant with operations in many countries including Australia, Brazil, Peru, Chile and the United States. The company mines copper, nickel, and oil and gas as well as iron ore. As of 14 March 2022, the share price is up 10.5% in the last 6 months and up 73.2% in the last 5 years. BHP has a market cap of a massive $242.8 billion and an impressive dividend yield of 10.2%.
Vale is a mining company that operates in approximately 30 countries. As well as iron ore, Vales churns out manganese, nickel, copper and coal. Vale also operates logistics to transport their raw materials via railways and ships. As of 14 March 2022, the share price is up 2.29% in the last 6 months and up 76.6% in the last 5 years. Vale currently has a market cap of $88.3 billion and an extremely generous dividend yield of 14.0%.
Compare platforms to buy iron stocks
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Why are iron ore prices rising?
If you’re thinking about starting to invest in iron ore, then you may be wondering why prices are rising. It’s partly due to the knock-on effect of current investor confidence in the metal market, as many metals have recently soared in prices.
However, iron ore prices haven’t skyrocketed like some other metals. The iron ore price at the time of writing on 14 March 2022 is $155.36 per metric tonne. That’s actually down 7.67% from this time last year.
Iron ore prices are largely resilient to the effect of the conflict in Ukraine. That’s because most iron ore is churned out in Australia and Brazil. Russia and Ukraine only produce around 8% of global production
There was actually a huge spike in prices during the summer of 2021 when prices climbed to $212 per tonne. According to Zack investment research, “the steel industry came roaring back in 2021 after bearing the brunt of the pandemic last year.” But prices still haven’t climbed back to that level.
What is iron ore used for?
Iron ore is commonly alloyed with other metals like tungsten, manganese, nickel, vanadium, and chromium as it’s not strong enough to use on its own. It’s commonly used in construction, car manufacturing and many other industrial applications.
Mining iron is a low margin business as iron is worth a lot less than many other metals. There are also significant costs transporting, shipping and storing iron. For this reason, mining companies need a high volume production to make any profit and mining and 70% of the world’s production is mainly carried out by the top 4 companies.
Pros and cons of starting to invest in iron ore
- May benefit from price increases in the future
- Could diversify your portfolio if you don’t currently invest in commodities.
- Iron ore prices are extremely volatile so you could experience big losses as well as big gains. For example, prices were $187 per metric ton in Feb 2011 but dropped like a stone to $41 per ton by Dec 2015. By the summer of 2021, they had climbed to $212 per ton before slipping back down to £133 per ton in January 2022.
In times of stock market volatility, investors tend to see commodities, including iron ore as a safe haven from the roller coaster of the stock market. However, as usual, things aren’t quite that simple.
Iron prices are also extremely volatile and it’s very difficult to predict metal prices in the future. It may be worth investing in metals, including iron ore, as part of a balanced portfolio. Most experts suggest that you aim for a diversified portfolio that’s balanced between several different types of investment and geography.
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