Category: Stock Market

The HUB24 Ltd (ASX: HUB) share price will be one to watch on Thursday.

This follows the release of the investment platform provider’s first quarter update this morning.

What did HUB24 announce?

HUB24 has continued its positive form in FY 2022 and reported further strong growth in its funds under administration (FUA).

According to the release, the company achieved record first quarter platform net inflows of $3 billion for the three months ended 30 September.

As a result, at the end of the period, total FUA reached $63.2 billion. This comprises platform FUA of $45.4 billion, which is up 139% year on year and 9.5% since the end of June, and Portfolio, Administration and Reporting Services (PARS) FUA of $17.8 billion.

Management notes that this record quarter comes on the back of a record FY 2021 net inflow result. It feels this is a testament to HUB24’s market leadership position and continued focus on delivering innovative solutions and customer service excellence.

The company also revealed that, according to the latest Strategic Insights data, it ousted Netwealth Group Ltd (ASX: NWL) to take the top spot for share of net inflows for the June quarter. Positively, this means HUB24’s market share has increased to 4.3% from 2.1% over the 12 months to 30 June putting it in 7th position.

Looking ahead, management appears optimistic that the fund inflows will continue. It advised that its new business pipeline continues to grow with 30 new licensee agreements signed during the quarter. This includes new agreements with self-licensed advisers, boutiques, and an advice aggregator.

Is the HUB24 share price in the buy zone?

One leading broker that appears to believe the HUB24 share price is in the buy zone is Credit Suisse.

Earlier this week the broker retained its outperform rating and lifted its price target to $34.00.

Based on the current HUB24 share price, this implies potential upside of 18% over the next 12 months.

The post HUB24 (ASX:HUB) share price on watch after record Q1 performance appeared first on The Motley Fool Australia.

More reading

• These were the worst performing ASX 200 shares last week

Motley Fool contributor 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 and has recommended Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3p08PwX

At the current Bubs Australia Ltd (ASX: BUB) share price, there are a few different reasons why it could be worth owning.

Bubs offers consumers a number of different products including goat milk infant formula, Bubs organic grass-fed cow’s milk infant formula, organic baby food, cereals, toddler snacks and Vita Bubs infant and children’s vitamin and mineral supplements.

It’s also the leading producer of goat dairy products in Australia, with exclusive milk supply to the farm gate.

The business recently announced its FY22 first quarter update, which had several positive elements which were compelling:

Chinese recovery

Chinese customers are huge consumers of infant formula products.

Bubs has been experiencing difficulties relating to Chinese demand and sales, but it now seems to be going through a recovery.

The company said that the daigou, cross-border e-commerce and general trade sales to China were up 156% year on year and 98% quarter on quarter, which contributed 53% of quarterly gross revenue.

Breaking that down into different segments, CBEC gross revenue rose 50% year on year, with 14% growth quarter on quarter.

Daigou gross revenue went up 451% year on year (with infant formula sales going up 6.5 times). It was also up 209% quarter on quarter. More growth like that could be very helpful for the Bubs share price.

International growth and diversification

The business has advanced its global expansion strategy by establishing entities in New Zealand, China and USA.

Outside of China, the business continues to see strong growth. International gross revenue for the quarter was up 489% year on year and up 35% quarter on quarter.

It said that the first shipment of Aussie Bubs products arrived in the USA during the quarter and Bubs is now an official Walmart vendor, with the first online sales expected to be realised in October 2021.

Bubs is now being sold into a number of Asian countries including Vietnam, Malaysia, Singapore, South Korea and Japan.

Dennis Lin, the Bubs executive chair, said:

We continue to explore opportunities to stretch the Bubs brand to cater to new market segments, adjacent categories and consumer groups. In light of that, we are confident that our vision to take Bubs to a global stage is becoming reality. We are investing in our manufacturing capabilities at our facility in Victoria.

Bubs also said that it has created Deloraine Dairy Solutions, which made up 17% of the first quarter revenue, is focused on industrial dairy ingredient sales, contract manufacture and end-to-end product development for global customers. This increases the diversification of the customer base, optimises its assets and brings efficiencies across the entire business.

Positive cashflow

Achieving positive operating cashflow can be an important step for a business so that it isn’t reliant on external funding for its day to day operations.

In the first quarter, it received $15.3 million of cash receipts and made $0.5 million of operating cashflow. It spent $8.1 million on product manufacturing and operating costs, as well as $2.8 million on advertising and marketing.

The post 3 reasons why Bubs (ASX:BUB) shares could be worth owning appeared first on The Motley Fool Australia.

More reading

• Bubs (ASX:BUB) share price rockets 17% on revenue growth
• Why is the Bubs (ASX:BUB) share price leaping 7% on Tuesday?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3BE7GP2

The Temple & Webster Group Ltd (ASX: TPW) share price could be worth considering at the moment.

This e-commerce player may have a lot of potential and it could be worth considering for the long-term.

COVID-19 has really dialled things up for the online retail sector. Temple & Webster is trying to take advantage of the increase in demand. It’s succeeding at generating more volume and growth.

Here are three good reasons to consider the Temple & Webster share price:

Rapidly growing

A business that is rapidly growing each has the ability to deliver good total growth after a years thanks to the power of compounding.

Businesses that are scalable, like online retail, can really drive profit higher if revenue is increasing at a nice rate.

FY20 saw revenue growth of 74% to $176.3 million. FY21 revenue went up 85% to $326.3 million. In a trading update for the first two months of FY22, revenue had grown by another 49%.

FY21 showed how profitable the business can be, despite the high level of investing it’s doing for growth. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 141% to $20.5 million, whilst ‘normalised’ net profit was 165% higher to $14 million.

Temple & Webster continues to look for new ways to increase and diversify its earnings. Business customers are a growing part of the picture. The trade and commercial division saw revenue growth of 110% year on year.

The Temple & Webster share price could be significantly influenced by how much it grows its revenue and profit over the coming years.

Big addressable market

Temple & Webster says that it’s operating in a large $16 billion market, with less than 9% sold online. This excludes the business to business market, which Temple & Webster does have a growing presence in.

At the end of FY21, it had 778,000 active customers – this was an increase of 62% year on year.

The business has a growing range of products on offer. It has around 210,000 products from more than 500 suppliers across 210 categories. Around 74% of this is operated through a ‘drop ship’ model, where the supplier sends the product directly to the customer. This comes with no inventory risk.

Its operating model allows it to have a negative working capital model. This way, it can leverage third party warehouses and carrier networks. The average time to dispatch is 1.9 days.

Investing to capture the opportunity

Temple & Webster is investing in a number of areas to increase its revenue and its long-term profit margins.

For example, it’s investing in its private label offering, which offers diversification of supply, less dependency on the drop ship network, improved margins, stock assurance and speed of dispatch.

It’s investing in its app so that it’s the leading offering and can drive higher levels of engagement, plus repeat purchasing.

Temple & Webster is also looking to merge the online and offline experience with its augmented reality offering so that customers can see the products in their room. This can remove barriers in the online shopping journey and increase conversion.

The company is also investing in an AI interior design service, suggesting products to match a customer’s selected item. The next version will be 3D generated life-like rooms. These types of things also drive the conversion rate and average order values.

Market capitalisation snapshot

At the current Temple & Webster share price, it has a market capitalisation of $1.45 billion, according to the ASX.

The post 3 reasons why the Temple & Webster (ASX:TPW) share price could be a top buy appeared first on The Motley Fool Australia.

More reading

• 3 excellent ASX growth shares to buy now
• 2 excellent ASX growth shares named as buys
• 3 fantastic ASX growth shares to buy
• 2 leading ASX e-commerce shares that could be buys in October 2021
• These ASX shares could be top options for growth investors

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3lEaG8B

Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Datt Capital principal Emanuel Datt explains how a coal miner could possibly be a great investment and why it’s important to practise dollar-cost averaging.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for 4 years, which stock would you want to hold?

Emanuel Datt: It was quite funny because when I read this question, I thought of SelfWealth Ltd (ASX: SWF). 

But then I realised, “Oh, well, SelfWealth’s whole business is about having a tradable market. Oh, that wouldn’t work.”

So I think that the stock that we would want to hold would be Whitehaven Coal Ltd (ASX: WHC). Ultimately, that’s driven by the reality that the transition to cleaner energy sources will require coal, and lots of it, effectively. 

I think that, ultimately, that’s driven by the green lobby having labelled nuclear power as dangerous but, conversely, this strengthens the position of fossil fuels. It basically extends what we think will be the time horizon for fossil fuels to be used. 

Longer term, the coal market is positively positioned because new mines are generally quite difficult to permit and the output from existing mines is falling, and this is despite relatively stable demand. That’s projected over the next 20 or so years.

Accordingly, we think that there’s going to be enduring supply-demand mismatch, at least over the next 10 to 20 years [which will] lead to higher prices down the line. 

Whitehaven’s coal is known for its positive clean qualities, I guess. Its customers are primarily ex-Chinese east Asians — like the Japanese and Koreans. It also has already permitted and advanced expansion opportunities while also, we feel, that it’s materially undervalued on projected DCF [discounted cash flow] basis. 

If strong coal prices persist, then we feel that Whitehaven will be in a very strong position to potentially cash fund their expansion projects while also making generous capital returns back to shareholders. 

The way we see it… Whitehaven is just a pure cash machine, so we’d feel quite comfortable holding this for the long term.

MF: Is it one of your core holdings?

ED: Yeah. Well, we’re actually sort of building into it at the moment because we do have a position, but not a big enough position at the moment.

Looking back

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

ED: Most recently, it’s not buying Whitehaven in May in the low $1 range.

MF: Yes, the price has ramped up since mid-May, hasn’t it?

ED: Yeah, it’s gone up about 3 times.

But we were [still] thinking about buying because we know the history of the company quite well, and we noticed that a particular major shareholder was reducing their stake. Ultimately, we were too fixated on an entry point around $1, and I think the low was maybe $1.10 or $1.20 or something like that. 

So, being too fixated, we just missed out because it shot up to $2 very quickly and today it’s trading at over $3. Ultimately, we like the company so we’re having to put up our hard earned [at] over $3.

MF: It goes to show you, even the professionals are susceptible to anchoring.

ED: Absolutely, yeah. I think it’s really just a prime example of just being overconfident in the information that we had at hand. 

Ultimately, ideally, we should’ve staggered our entry given how confident we were in the company’s prospects. But… [we had] the bias of hoping that’ll pull back to make an entry point at some stage. 

It’s really a great lesson to practise dollar-cost averaging.

The post Why I’d hold this coal-mining ASX share for 4 years: expert appeared first on The Motley Fool Australia.

More reading

• 2 best ASX shares to buy right now: fund manager
• Star Entertainment and SkyCity share prices plunge, Whitehaven Coal up. Scott Phillips on Nine’s Late News
• Here are the top 10 ASX shares today
• Here are the 3 heaviest traded ASX 200 shares on Monday
• Why Clinuvel, EML, Regal, & Whitehaven Coal shares are sinking

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3aBVaUg

The Fortescue Metals Group Limited (ASX: FMG) share price could be an interesting idea to think about for a few different reasons.

Fortescue is one of Australia’s biggest miners, with several assets. In FY21 it shipped 182.2 mt of iron ore, which was 2% higher than what it did in FY20. It currently has the Chichester Hub in the Chichester Ranges, the Solomon Hub in the Hamersley Ranges, it is developing the Western Hub (140km west of Solomon) which includes the new Eliwana mine and it owns its Hedland operations.

The Hedland operations are wholly owned and have purpose-designed rail and port facilities, constructed to deliver iron ore from the mines to Port Hedland to ship the commodity to customers. Its railway covers 760km of track, which it claims is the fastest and heaviest haul line in the world.

That’s the current business. Here are three reasons why the Fortescue share price could be one to consider:

Lower share price

The Fortescue share price has fallen by around a third over the past two months. There could be a few different factors. Analysts point to the decline of the iron ore price and perhaps the ongoing uncertainty in the Chinese real estate market as key contributors to the problems.

According to the latest news reports, not only is Evergrande facing problems, but there are now other Chinese real estate businesses also seemingly missing payments or in difficult financial trouble including Fantasia, Sinic Holdings and Modern Land (China).

Either way, the Fortescue share price is now substantially lower than where it was a few months ago, making it potentially better value.

Two of the largest broker ratings have come from brokers that rate the Fortescue share price as a buy. Ord Minnett has price target on Fortescue of $25 and Macquarie Group Ltd (ASX: MQG) has a price target of $21.

Growth of other projects

Fortescue is looking to expand its mining operations, so that it isn’t so focused on lower grade iron ore.

The Iron Bridge Magnetite Project is an important part of that. It’s costing between US$3.3 billion to US$3.5 billion to develop, but it will deliver 22mt per annum of high grade 67% Fe magnetite concentrate product. This is located 145km south of Port Hedland.

Fortescue said the innovative process design, including the use of a dry crushing and grinding circuit, will deliver globally competitive capital intensity and operating costs.

The company continues to look for iron ore that can be produced at low cost in Australia.

It’s also looking for copper-gold in the Paterson, Rudall and Goldfields regions in Western Australia. Fortescue says additional exploration activity is underway in New South Wales and South Australia, including through the farm-in and joint venture agreement with Tasman Resources in South Australia.

On top of that, it is looking for global opportunities and commodities that can support decarbonisation and electrification of the transport sector. It’s looking for copper in Ecuador and copper-gold in Argentina.

It’s also assessing exploration and development opportunities in Peru, Chile and Brazil, as well as Portugal and Kazakhstan.

Plus, it has a 19% stake of the Canadian-listed Candente Copper Corporation.

Fortescue Future Industries (FFI)

FFI is a division of Fortescue. Its goal is to become the world’s leading, fully renewable energy and green products company, powering the Australian economy and creating jobs for Australia as the country transitions away from fossil fuels.

One of the most recent announcements out of FFI was the construction of the world’s largest electrolyser, renewable industry and equipment manufacturing centre at Gladstone, Queensland.

The Fortescue share price rose 5% on the day that this was announced.

This global green energy manufacturing centre (GEM) will be the first in a series of centres that will “transform regional Australia throughout the manufacture of equipment that is critical to the generation of renewable energy and green hydrogen”. The GEM will be a key enabler of Fortescue achieving its target of carbon neutrality by 2030.

The GEM will include the manufacture of wind turbines, solar photovoltaic cells, electrolysers, long-range electric cabling, electrification systems and associated infrastructure.

Subject to customer demand, as orders firm for both electrolysers and the associated green industry, the investment could be up to US$650 million. The initial electrolyser investment is expected to be US$83 million.

The post 3 reasons why the Fortescue (ASX:FMG) share price could be a buy appeared first on The Motley Fool Australia.

More reading

• Fortescue (ASX:FMG) share price down 5% as iron ore retreats
• Why Bank of Queensland, Fortescue, Liontown, & Pact shares are dropping
• Here’s why ASX hydrogen shares are leaping higher today
• Why did the Fortescue (ASX:FMG) share price have such a lousy FY22 first quarter?
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3Aykjda

The Australian share market is home to a large number of shares offering attractive dividend yields.

But which ones should you buy? Here’s are two that one leading broker rates highly right now:

DEXUS Property Group (ASX: DXS)

The first ASX dividend share to look at is this Australian real estate company with a focus on owning, managing, and developing office, industrial and retail properties. Dexus’ areas of operation include both a direct property portfolio and third-party fund management. The former invests directly in Australian office and industrial properties, whereas the latter manages office, industrial and retail properties located across Australia.

The team at Macquarie are very positive on the company and responded positively to recent news that it is acquiring $900 million of industrial assets, including a majority stake in Jandakot airport. The broker has put an outperform rating and $11.90 price target on its shares.

Macquarie is also forecasting dividends per share of 53.7 cents in FY 2022 and 58.1 cents in FY 2023. Based on the current Dexus share price of $10.48, this will mean yields of 5.1% and 5.5%, respectively.

Mineral Resources Limited (ASX: MIN)

Another ASX dividend share that Macquarie is positive on is Mineral Resources. It is a mining and mining services company with exposure to iron ore and lithium. And while iron ore prices have fallen heavily in recent months, Macquarie doesn’t expect this to stop Mineral Resources from paying generous dividends.

The broker has pencilled in fully franked dividends per share of $2.81 in FY 2022 and $2.47 in FY 2023. Based on the current Mineral Resources share price of $42.28, this will mean yields of 6.6% and 5.8%, respectively, over the next two years.

Macquarie has an outperform rating and lofty $77.00 price target on the company’s shares.

The post Broker names 2 ASX dividend shares to buy appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell today
• CBA (ASX:CBA) and this dividend share have been named as buys
• These were the worst performing ASX 200 shares last week
• These were the 5 worst performing ASX 200 shares in September
• Broker tips Mineral Resources (ASX:MIN) share price to rise 46%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3BEVe1D

On Wednesday the S&P/ASX 200 Index (ASX: XJO) gave back its morning gains and dropped into the red. The benchmark index fell 0.1% to 7,272.5 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 expected to rebound

The Australian share market looks set to bounce back strongly on Thursday. According to the latest SPI futures, the ASX 200 is expected to open the day 46 points or 0.65% higher this morning. This follows a decent night on Wall Street, which in late trade sees the Dow Jones up 0.05%, the S&P 500 up 0.25%, and the Nasdaq trading 0.65% higher.

Oil prices fall

Energy shares including Oil Search Ltd (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) will be on watch after oil prices edged lower. According to Bloomberg, the WTI crude oil price is down 0.2% to US$80.50 a barrel and the Brent crude oil price has fallen 0.2% to US$83.24 a barrel. Demand concerns appear to be the reason behind the softening oil prices.

Gold price jumps

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a strong day after the gold price jumped. According to CNBC, the spot gold price is up 1.9% to US$1,792.5 an ounce. Weakness in the US dollar and bond yields boosted the precious metal.

Bank of Queensland shares rated as buys

The Bank of Queensland Limited (ASX: BOQ) share price tumbled lower on Wednesday following the release of its full year results. The team at Goldman Sachs believe this could be a buying opportunity for investors. This morning the broker has retained its buy rating and trimmed its price target slightly to $10.02.

Iron ore prices fall

The shares of mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) will be on watch today after iron ore prices pulled back again. According to Metal Bulletin, the spot benchmark iron ore price has fallen 3.7% to US$124.17 a tonne. This followed a formal announcement on the upcoming winter restrictions by China’s Ministry of Industry & Information Technology.

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

More reading

• Why did the BHP (ASX:BHP) share price have such a lousy FY22 first quarter?
• Here are the top 10 ASX shares today
• ASX ETF sector continues to boom and hit record highs
• Cannon (ASX:CNR) share price rockets 39% on first drill results
• Could renewed inflation fears rekindle these ASX 200 gold shares?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3lCVdWr

The Virtus Health Ltd (ASX: VRT) share price spent most of today in the green despite its planned acquisition being faced with a new challenge.

The company is waiting to complete its acquisition of Adora Fertility and 3 day hospitals, together known as the Adora Businesses. Currently, Healius Ltd (ASX: HLS) owns the Adora Businesses.

However, today Virtus announced the Australian Competition and Consumer Commission (ACCC) is planning to stop the acquisition from being finalised.

Despite the apparent bad news, Virtus performed quite well on the ASX today.

As of Wednesday’s close, the Virtus share price is $5.47, 0.37% higher than Tuesday’s closing price.

For context, the S&P/ASX 200 Index (ASX: XJO) fell 0.07% today.

Let’s take a closer look at the new hurdle facing the healthcare company specialising in fertility treatments and day hospital services.

Virtus unfazed by ACCC roadblock

The Virtus share price gained today despite announcing seemingly unfortunate news.

The company has had its plans to acquire Adora Fertility and 3 day hospitals halted by the ACCC.

According to Virtus, the watchdog intends to seek an interim order from the Federal Court to prevent the acquisition’s completion despite the ACCC’s public review not being finalised.

However, Virtus is still planning to complete the acquisition. It said it will defend any proceedings.

The company also noted it has kept the ACCC in the loop throughout the acquisition process.

Virtus stated it has “constructively engaged” with the watchdog since it announced it would conduct a public review process of the acquisition

Virtus first announced its plans to acquire Adora Fertility and the 3 day hospitals back in August. It agreed to pay $45 million for the businesses. The funds were to come from a now-completed $35 million capital raise and existing cash reserves.

Virtus share price snapshot

Right now, the Virtus share price is around 3% higher than it was at the start of 2021. It is also 23% higher than it was this time last year.

The post Virtus Health (ASX:VRT) share price shrugs off latest acquisition hurdle appeared first on The Motley Fool Australia.

More reading

• Here are 2 ASX dividend shares analysts rate highly
• Brokers name 2 ASX healthcare shares to buy
• Top brokers name 3 ASX dividend shares to buy today
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Virtus Health Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/2YH7QXT

The Fortescue Metals Group Limited (ASX: FMG) share price was selling off sharply on Wednesday. Fortescue shares closed the day down 5.34% to $14.

Iron ore prices pull back

Iron ore spot prices retreated on Tuesday, amid limited trading at Chinese ports, sources told Fastmarkets.

For instance, benchmark iron ore prices fell US$6.03 or 4.5% to US$129 a tonne.

Chinese iron ore futures on the Dalian Commodity Exchange also tumbled on Wednesday.

The most active futures contracts for January 2022 delivery is currently down 4.5% to 740 yuan (US$114) a tonne.

What’s next for iron ore?

Australia and New Zealand Banking Group senior commodity strategist Daniel Hynes expects Chinese steel demand to continue to flatline towards the end of the year, according to Bloomberg.

“China’s plans to have a flat steel production growth this year look possible, as output curbs have been accelerated by power shortfalls.”

Hynes said that China, the world’s largest construction and manufacturing material producer, will have to contract 10% in annual terms between September and December to meet its decarbonisation goals.

On the other hand, Commonwealth Bank of Australia commodities analyst Vivek Dhar wrote that “steel output is reportedly set to increase in October in some parts of China, like Tangshan, Jiangsu, Zhejiang and Anhui, after these regions exceeded steel production cuts in September.”

Weak steel output could continue into 2022, ahead of Beijing’s Winter Olympic Games in February.

This is because, in the past, authorities have shut down a number of industrial activities near the capital to keep the sky as blue as possible.

Fortescue share price snapshot

Fortescue’s year-to-date return continues to linger around the negative 40% level.

The sharp selling between early August and late September appears to have largely subsided. This is as the Fortescue share price consolidates around the $14 level.

Despite Fortescue shares finding a footing around $14, many experts point to lower iron ore prices in 2022. One such expert is the Australian government’s commodity forecaster, the Office of the Chief Economist (OCE).

The OCE forecasts iron ore to average around US$150 a tonne in 2021. Further, it predicts this will fall to below US$100 a tonne in 2022.

The post Fortescue (ASX:FMG) share price down 5% as iron ore retreats appeared first on The Motley Fool Australia.

More reading

• Why Bank of Queensland, Fortescue, Liontown, & Pact shares are dropping
• Here’s why ASX hydrogen shares are leaping higher today
• Why did the Fortescue (ASX:FMG) share price have such a lousy FY22 first quarter?
• Leading brokers name 3 ASX shares to buy today
• What this leading broker is saying about the Fortescue (ASX:FMG) share price

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3ABEirm

The BHP Group Ltd (ASX: BHP) share price has been impacted over the course of the first quarter of FY22. Its shares have shed more than 25% in value, leaving investors concerned about the next price action for iron ore.

At the closing bell on Wednesday, BHP shares further added to their losses, registering a drop of 1.03% to $37.59.

What happened to BHP?

It’s no surprise the plunging spot price of iron ore has had a detrimental effect on the miner’s shares.

In May, the steel-making ingredient reached an all-time high of US$229.50 per tonne. BHP shares accelerated on the back of bumper revenues over the period.

However, a slowdown in Chinese demand amid political pressure has led iron ore prices to tumble in recent months. Currently, iron ore is fetching US$126.42, a mammoth 40% decline since the beginning of July (Q1 FY22).

As Australia’s rift grows with China, its central government introduced new caps for its steel producers. These are ostensibly to achieve environmental targets but are also seen as an effort to curb reliance on Australian iron ore, boosting domestic supply and demand.

Chinese mills were instructed to limit 2021 output to no more than 2020 levels, or face big penalties.

Iron ore imports into China fell across the quarter – 8% in July, 12% in August, and another 12% in September. This translates to 95.61 million tonnes of the ingredient last month compared to 108.55 million tonnes in September 2020.

To meet its goal, steel output will have to contract another 10% for last 3 months of the year.

China has increased its efforts to close down some domestic factories to achieve carbon reduction targets. In addition, it has expanded supply sources as well as seeking alternative resources to maintain production.

BHP share price summary

Over the past 12 months, BHP shares have moved in circles to post less than a 4% gain. Year-to-date, the company’s shares are down around 11%.

BHP commands a market capitalisation of roughly $111 billion, making it the third largest company on the ASX.

The post Why did the BHP (ASX:BHP) share price have such a lousy FY22 first quarter? appeared first on The Motley Fool Australia.

More reading

• Could the Woodside (ASX:WPL) share price hit $27.50 by the end of 2021?
• BHP (ASX:BHP) share price rises amid coal asset sale rumours
• ASX 200 (ASX:XJO) midday update: Westpac’s $1.3bn earnings hit, Ansell sinks
• NSW has reopened. Time to buy?
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/2X6taoK