The Winners and Losers From Surging Iron Ore Prices – by Michael Msika (Bloomberg/Yahoo Finance – June 21, 2019)

(Bloomberg) — In the world of metals and mining, sometimes it’s better to sell the raw product rather than the finished one.

This seems to be a lesson for investors who chose to hold shares in ArcelorMittal rather than Rio Tinto Group this year. Despite nagging trade tensions and fears about global growth, Rio is up 30% in 2019, while the world’s biggest steelmaker has dropped 16%.

Global diversified miners have rewarded investors with record payouts and benefited from soaring iron-ore prices due to the supply concerns that followed Vale SA’s dam disaster in January. At the same time, Chinese mills have continued to set new production records, consuming more of the steelmaking ingredient.

Rio Tinto was carried by a “perfect storm,” said Arnaud du Plessis, a senior portfolio manager at CPR Asset Management in Paris, citing iron ore’s gains of about 75% in a year, the star performer among commodities.

“Rio, which is highly exposed to iron ore and which benefits from very low production costs, has been the clear winner.” The London-based miner draws investors because of its strong balance sheet and high free cash flow generation, he said.

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