Australian mining stocks drop as Trump tariffs on China unsettle markets

Reuters
02-03
Australian mining stocks drop as Trump tariffs on China unsettle markets

By John Biju and Nichiket Sunil

Feb 3 (Reuters) - Australian mining stocks .AXMM tumbled on Monday after U.S. President Donald Trump slapped tariffs on China, the country's top trading partner, straining commodity prices and raising concerns over the demand outlook of domestic miners.

The mining index .AXMM ended 1.9% lower, its biggest decline since Dec. 19. The benchmark S&P/ASX 200 index .AXJO was down 1.8%.

Top miners BHP Group BHP.AX and Rio Tinto RIO.AX fell 1.8% and 2.1%, respectively.

On Saturday, Trump ordered additional levies of 25% on imports from Mexico and most goods from Canada, as well as 10% on goods from China. The tariffs are scheduled to kick in on Tuesday.

Prices of iron ore, a key ingredient to make steel, were under pressure throughout last year due to weakness in China's property sector, although the government's stimulus measures offered some respite.

"The moves are primarily driven by overnight U.S. tariff updates that came through, with a lot of pressure being put on the underlying base metal prices, especially copper," said Junvum Kim, Asia Pacific senior sales trader at Saxo Markets.

Most base metals in London dipped on Monday, with copper hitting its lowest in four weeks. MET/L

U.S. tariffs on China are likely to exacerbate its existing economic difficulties and could further squeeze iron ore demand.

China buys around 80% of Australia's iron ore, its largest export.

"If China shifts manufacturing to other countries to avoid tariffs, this impacts demand from Australian producers and shifts the supply chain", said Grady Wulff, market analyst at Bell Direct.

Miner firm Fortescue FMG.AX is particularly affected as "about 88% of its revenue is from China", Saxo Markets' Kim said. The stock fell 4.4% on Monday.

Australia's mining index slumped more than 18% in 2024 compared to a 7.5% jump in the benchmark.

(Reporting by John Biju and Nichiket Sunil in Bengaluru; Editing by Sonia Cheema)

((John.Biju@thomsonreuters.com;))

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