Wednesday 24 July 2019 1:59 pm

Miners drag down FTSE 100 after iron ore prices dip

The FTSE 100 fell 63 points today as mining stocks tumbled on news that Brazilian giant Vale was resuming operations at one of its major facilities. 

Shares in Rio Tinto fell 4.5 per cent to 4,610p, shares in BHP fell 4.1 per cent to 1,958p and shares in Anglo American slipped 3.4 per cent to 2,182p.

Read more: BHP iron production rebounds after cyclone hit third quarter

The FTSE 100 fell 63 points to 7,492, a 0.8 per cent decline.

The poor performance of mining stocks was driven by an announcement yesterday from Vale that it was resuming operations at its Vargem Grande iron ore complex.

The Brazilian miner said yesterday that authorities had authorised it to partially resume dry processing at the facility which should add 5m tonnes to annual production.

Regulators had ordered Vale to halt production in February to guarantee the stability of its dams after the collapse of one of its dams in January led to a mudslide that killed 248 people.

David Madden, chief market analyst at CMC Markets, said: “The FTSE 100 is firmly in the red as mining stocks are weighing on the index.

“A sell-off in iron ore prices in China has prompted a decline in major mining stocks…and seeing as the London equity benchmark has a relatively large portion of natural resources stocks in its makeup, the British market is underperforming its Continental counterparts.”

Read more: Chinese steel producers set new record in June

Analysts at Liberum also downgraded BHP, Anglo American and Rio Tinto to “hold” today on data that it said showed iron ore prices could be set for a slide.

“Steel inventories at traders have been unseasonably restocking, iron ore port inventory declines have stalled (actually built last week), spot steel mill profitability in China has now fallen to break-even levels and supply from scrap steel and domestic iron ore appear to have accelerated,” Liberum analysts said in a note today.