Mining meltdown: Anglo loses R40bn in a single day as commodities bleed

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China, the biggest importer of iron ore, has threatened to curb production volumes.
China, the biggest importer of iron ore, has threatened to curb production volumes.
  • Anglo American and Kumba Iron Ore shares have taken a hit from iron ore and PGM price movements.
  • China, the biggest importer of iron ore, has threatened to curb production volumes.
  • Iron Ore, which is used in steelmaking, peaked at $235.55 per ton in May.

A renewed meltdown in commodity prices has shaved billions off the value of some of South Africa's biggest mining companies.

Iron ore prices have seen the biggest hit, falling from a record high of $235.55 a ton in May to less than half - around $90 on Monday. China has increased stringent new production curbs on steel production to curb pollution. According to CNBC, the steel sector contributes up to a fifth of carbon emissions in that country. 

Other metals have also fallen, amid concerns about faltering global economic growth. A sudden surge in inflation, as well as ongoing Covid-19 infection waves, have cooled demand for commodities.

"It's been going down for a while, the [platinum group metal] prices are falling and the iron ore price has fallen badly," says Rene Hochreiter, managing director at Sieberana Research.

All of these metals have now fallen 20% from recent highs - meaning that they hit bear market territory.

"Rhodium has also been down ... and Anglo American makes a lot of money from PGMs and iron ore, that is the major reason behind the fall in prices."

Anglo American lost almost 6% - or more than R40 billion of its market capitalisation - in renewed selling on Monday.

Kumba Iron Ore, a subsidiary of Anglo, was among the worst performers in intra-day trade, losing more than 4%. 

Kumba exports iron ore to customers in a range of geographical locations around the globe including China, Japan, Korea and a number of countries in Europe and the Middle East. China is one of Kumba's significant export customers, other markets are Japan, Korea, European countries and the Middle East.

Palladium, which is also used in catalytic converters in car exhausts as an emissions-control device, has also taken a major strain due to reduced vehicle production as a result of a shortage in semiconductor chips.

Another drag on the stock market were fears around the future of China's debt-laden developer, Evergrande, which is facing a risk of going bankrupt if it fails to get a government bailout. 

This gave the gold price a boost, as investors fled to safe-haven investments. Gold Fields gained more than 4% on Monday, while Harmony was 2% stronger.

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