Could it be time to jump on ASX iron ore miners such as Fortescue Metals Group Limited (ASX: FMG), BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO)?
What has been happening?
The iron ore price has continued to climb higher despite everything that has been going on. Iron ore now costs almost US$147 a tonne. It hasn’t been this high since 2013 and it has more than doubled over the past couple of years.
That’s why, over the past five years, the Rio Tino share price has gone up 167%, the Fortescue share price has risen 1,048% and the BHP share price has risen 146%.
Commodity businesses ride the wave of the commodity price. It essentially costs the same to mine a tonne of iron whether the sale price is US$70 or US$140 per tonne. It means all that extra revenue per tonne is mostly just profit for the iron ore miners.
The demand from China has remained very high and there has been supply issues from Brazil because of COVID-19 impacts.
It’s great if you’re a shareholder that’s riding this surge of the iron ore price, the profit, the dividends and the share price.
So is now a good time to buy iron ore miners?
It may sound exciting to invest when things are going so well, but commodity businesses are notoriously cyclical and volatile. Resource businesses don’t just keep going up and up like a business like Xero Limited (ASX: XRO), Alphabet or Apple.
I don’t think it makes a lot of sense to buy whilst the iron ore price is so high. I have no idea when there may be weakness. No-one can truly know. The iron falls in 2009 and 2014 to 2016 were unpredictable.
It’s great that iron ore is so strong, it helps shareholders, states and governments during this difficult COVID-19 period as long as Chinese demand remains high.
However, there are other ASX dividend shares that I think can provide a more consistent and reliable dividend over the next few years such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), APA Group (ASX: APA) and Brickworks Limited (ASX: BKW).
