What Happened to Arrium’s Share Price?
The share price of iron ore producer Arrium Ltd [ASX:ARI] slumped by more than 3% today as the Australian stock market inched ahead. Arrium shares have fought a losing battle this year — the stock price has retreated by more than 57% since peaking just after New Year’s Day.
Why Did This Happen to ARI Shares?
This morning Arrium released its quarterly production report. The company sold a record 3.32 million tonnes of iron ore in the three months ending 30 June 2014. That would usually be cause for cheer…but Arrium’s average realised sales price collapsed by $US25 per tonne from the previous quarter’s average price to just $US85 a tonne.
Arrium blamed ‘increased discounting related to additional supply, the tightening of credit in China and higher port stocks in China’.
The market seems disappointed by the scale of the discounting, which appears to relate to lower-grade iron ore blends. That’s why Arrium shares have taken a hit today.
What Now For Arrium Ltd?
China will continue to demand plenty of iron ore well into the future, and with its debt refinanced, Arrium looks well-placed to continue supplying it. The market is tough right now, but you can’t keep stocks like this down forever. If you’re a resource investor, this stock should stay on your watch list.
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Cheers, Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
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The post Why the Arrium Share Price Fell Today appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
