How to Invest in Iron Ore (2024)

With strength and malleability on its side, iron ore has many industrial applications and is one of the world’s most important materials. However, its main use by far is in the production of steel.

Prices for iron ore have suffered in recent years, and while the prevailing uncertainty in the global economy continues to place downward pressure on the iron ore market in the short term, many analysts remain cautiously optimistic about the future.

For now, it’s all eyes on China, the world’s largest consumer of the metal. “Many attending the China Iron and Steel Association conference (in early 2023) were optimistic that China’s steel industry would surge due to pent-up demand following the COVID-19 pandemic,” states AG Metal Miner. “According to experts, the anticipated rebound of the real estate market should see backing due to relative stability in other sectors. Provided examples included automobile and shipping.”

How can investors gain exposure to the iron ore market? Read on for a look at ways to invest in iron ore.

What factors impact iron ore supply and demand?

Australia is the largest producer of iron ore by far, with Western Australia’s Pilbara region being a notable hotspot for the commodity. The country’s iron ore production came in at 880 million metric tons of usable iron ore in 2022, or 540 million metric tons of iron content, according to the US Geological Survey.

Other major producers in the iron-mining industry include Brazil, China and India.

Most iron ore trades under contracts in which major counterparties negotiate annual price changes. In recent years, oversupply, paired with lower-than-expected demand from the Chinese steel industry, has made things difficult for the iron ore market and has put major pressure on the iron ore price.

Activity in China has traditionally been the key driver of global iron prices, given that it is the world’s largest producer, user and exporter of steel products. Along with concerns about China’s economic growth, ongoing and seemingly escalating global trade disputes have weighed on the price of iron.

However, there are signs of economic recovery in China. According to the Global Times, China’s infrastructure investment was up by 10 percent in the first three months of the year: “China has accelerated infrastructure investment in the first quarter of this year to propel economic growth, launching more than 10,000 projects throughout the country.” This large-scale infrastructure spending bodes well for steel demand and the iron ore market.

Aside from recent developments, in the long run there is no doubt that there will always be demand for steel. The metal alloy is necessary to economies worldwide that want to build out and maintain their infrastructure, transportation and manufacturing industries.

What are the ways to invest in iron ore?

Investing in iron-producing companies is the main way investors can gain exposure to the iron market.

Smaller iron-focused mining and exploration companies are an option, but many have struggled to stay afloat in recent years due to low prices for the commodity — taking this route requires more research.

These circ*mstances have caused many investors to gravitate toward the world’s largest iron-mining companies, such as Vale (NYSE:VALE), Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), BHP (ASX:BHP,LSE:BHP,NYSE:BHP) and Fortescue Metals Group (ASX:FMG,OTCQX:FSUGY).

For those considering iron investment opportunities, these majors may be a good place to start.

This is an updated version of an article originally published by the Investing News Network in 2017.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

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