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.
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:
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:
Investing in iron-mining companies is one of the most simple ways to invest in iron ore.
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:
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%.
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.
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.
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.
47% of people we surveyed said they already invest in iron stocks or would consider investing in iron stocks.
| Response | |
|---|---|
| I would consider it | 42.44% |
| Not sure | 33.39% |
| I wouldn't consider it | 19.74% |
| I already invest in this | 4.43% |
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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