The iron ore spot price has climbed to 10-month highs following Vale’s decision to suspend iron ore mining at its Itabria site.

Prices are expected to remain high driven by the short-term concern of fewer shipments from Brazil. This is coupled with China’s port inventories being at a 3-year low and rising demand from Chinese steel mills.

Could this be an opportunity to buy in at the current Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG) and BHP Group Ltd (ASX: BHP) share price?

Iron ore shortage

Vale’s Itabria mining operations were suspended after at least 188 workers tested positive for the coronavirus. This site is responsible for approximately 12% of Vale’s total production. Vale’s supply in the short-term is at risk but it’s difficult to tell whether the company’s annual production will be impacted.  Broadly speaking, South America has struggled to contain the coronavirus – a near-term threat for its iron ore production and shipments.

An increasing dependency on Aussie miners to supply iron ore could be good news for the likes of Rio Tinto, Fortescue and BHP. 

Chinese iron ore consumption 

China has invested in its infrastructure, transport and energy sectors to claw its way back to positive growth. The construction sector is making a suggestive recovery judging by a rise in demand for cement and site machinery.

Data from the China Construction Machinery Association showed that the 25 largest excavator companies recorded sales up 60% year on year in May. Furthermore, the government announced plans to issue RMB$3.75trn worth of bonds to fund regional developments and support businesses hit by COVID-19.

Brazil’s production challenges coupled with an increase in construction activity in China could see iron ore prices remain at today’s elevated levels. 

Are Rio Tinto, Fortescue and BHP a buy? 

There are many near-term factors that point to higher iron ore prices. This would mean healthy margins and market-leading dividends from Aussie iron ore miners. 

Fortescue, being a pure iron ore play means its share price is more responsive to rising iron ore prices. Its shares hit a record all-time high last week of $15.25 while paying a dividend yield of 7.40%. Given how much it has run-up in recent times, I would personally avoid Fortescue shares for the time being. 

Alternatively, I believe the Rio Tinto and BHP share price represent good long-term value at today’s prices. Both shares are within 15% of its recent highs and pay a moderate dividend yield of around 6%. 

More reading

• These 5 ASX shares saw the biggest losses last week
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• ASX 200 Weekly Wrap: ASX back in the green
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• 2 blue chip ASX 200 dividend shares to buy next week

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) has fought back from a bad start and is storming higher. At the time of writing the benchmark index is up 0.25% to 5,957.8 points.

Four shares that are climbing more than most today are listed below. Here’s why they are starting the week with a bang:

The Austal Limited (ASX: ASB) share price is up 10% to $3.69. Investors have been buying the shipbuilder’s shares on Monday after it revealed that the U.S. government is investing US$50 million into its U.S. business. The agreement is part of the government’s national response to COVID-19 to maintain, protect, and expand critical domestic shipbuilding and maintenance capacity.

The James Hardie Industries plc (ASX: JHX) share price has climbed over 6% to $28.39. This morning the building materials company upgraded its guidance for the first quarter of FY 2021. James Hardie’s North American adjusted earnings before interest and tax (EBIT) margin is now forecast to be between 27% and 29% for the quarter. This compares with its previous guidance of 22% to 27%.

The Northern Star Resources Ltd (ASX: NST) share price is up 4.5% to $13.61. As well as getting a boost from a rising gold price, investors appear to have responded positively to an asset divestment announcement. The gold miner has agreed to divest the Mt Olympus Project, which comprises most of the Ashburton Project in Western Australia. It will be sold to Kalamazoo Resources Limited (ASX: KZR) for a deferred contingent cash consideration of $17.5 million.

The Ramelius Resources Limited (ASX: RMS) share price has jumped 14% to $2.04 after upgrading its production guidance. The gold miner revealed that its quarterly production is now expected to be in excess of 80,000 ounces. This compares to previous guidance of 65,000 to 70,000 ounces. In light of this, FY 2020 guidance is expected to be a record 225,000 to 230,000 ounces. This is up from its previous full year guidance of 210,000 to 220,000 ounces.

More reading

• ASX 200 flat: Altium update disappoints, Metcash posts full year loss
• A $73m boost sends the Austal share price to the top of the ASX 200 today
• James Hardie share price in spotlight as it upgrades profit guidance
• 5 things to watch on the ASX 200 on Monday
• Top fund manager reveals some of the best ASX shares to own

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Althea Group Holdings Ltd (ASX: AGH) share price is on the rise today. This follows an announcement that company’s subsidiary has entered into a cannabis beverage production agreement. Althea’s subsidiary, Peak Processing Solutions, has struck a deal with Collective Project Limited to manufacture canned, cannabis-infused beverages at its Ontario facility.

What does Althea do?

Althea is a supplier of medicinal cannabis. The company operates in the highly regulated medical cannabis markets across Australia, the United Kingdom, and Germany. It also has plans to expand into emerging markets throughout Asia and Europe. Althea’s Peak Processing Solutions subsidiary is an extraction and manufacturing business based in Canada. Work was recently completed on Peak Processing’s manufacturing facility and licensing of the facility with Health Canada is currently underway.

What does the new agreement mean?

The new agreement is an important milestone for Peak Processing Solutions and provides validation of the company’s industry-leading production capabilities. Manufacture under the agreement will commence once Peak Processing Solutions is granted its Health Canada Standard Processing Licence. Once licensed, Peak Processing Solutions will support clients with a suite of professional services including product and brand development, regulatory affairs, warehousing, and distribution.

Peak Processing Solutions aims to leverage Canada’s ‘Legalization 2.0’, which allows the sale of cannabis-infused edibles, drinks, nutraceuticals, and cosmetic products. The subsidiary is being positioned as a leading contract manufacturer for consumer brands looking to supply recreational cannabis and create cannabis infused products.

How are cannabis shares performing?

The Althea share price has more than doubled since March when it hit a low of 16 cents per share. In this respect, Althea has outperformed other ASX-listed cannabis companies. For example, Cann Group Ltd (ASX: CAN) has seen its share price increase 55% from its March low. Meanwhile, the Auscann Group Holdings Ltd (ASX: AC8) share price has increased 14% over the same period.

What is the outlook for the cannabis market?

Despite the coronavirus pandemic, the global medical marijuana market is predicted to grow by US$22.33 billion over the next four years, with a compound annual growth rate of 24%. In fact, cannabis sales in the United States surged in the wake of the pandemic. On 16 March, sales of recreational marijuana increased by 159% in California, 100% in Washington State, and 46% in Colorado, compared to the same day in 2019.

Australia’s cannabis market is forecast to grow from $52 million in 2018 to $1.2 billion in 2027. This would make it the fifth largest market in the world. The jump in value is the anticipated result of regulatory changes that have come into effect in recent years, lifting restrictions on the use of cannabis for certain purposes. Althea, Auscann, and Cann Group all stand to benefit from this burgeoning market.

More reading

• Why AusCann, Phoslock, Kogan, & Village Roadshow are dropping lower
• ASX cannabis shares see mixed recovery
• Why Cann, IAG, Monadelphous, & Webjet shares are storming higher

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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