Fortescue (ASX:FMG) share price up amid rainy days for Brazilian iron ore

The sun is shining on Fortescue shares today as investors dive in…
The post Fortescue (ASX:FMG) share price up amid rainy days for Brazilian iron ore appeared first on The Motley Fool Australia. –

Key Points

The Fortescue Metals share price is up 2.47% on the ASX today
Fortescue shares are benefitting from higher iron ore prices, following heavy rain across Brazilian mining sites
Omicron poses potential risk to demand side in China

The Fortescue Metals Group Limited (ASX: FMG) share price is continuing its rebound on Thursday.

At the time of writing, shares in the iron ore behemoth are swapping hands for $21.40, up 2.47%. For context, the S&P/ASX 200 Index (ASX: XJO) is 0.34% higher in afternoon trade.

The Fortescue share price is still a long way off its 52-week high of $26.58. The share price reached this level in late July when iron ore prices were touching record highs of US$220 per tonne.

Let’s take a closer look at what could be behind the optimism for ASX-listed Fortescue today.

Bad weather constrains Brazil’s iron ore supply

Like any other commodity, the price of iron ore is the product of a supply and demand equation. To the delight of Fortescue shareholders, the output of that equation is looking more favourable for suppliers today.

After retreating to nearly US$90 per tonne in November 2021, iron ore prices have sprung back to life. At present, the price of the steel-making commodity is fetching about US$131.60 per tonne. This places iron ore at a 3-month high — but what’s behind this new momentum?

According to S&P Global, torrential rainfall across Minas Gerais in southeastern Brazil has disrupted iron ore mining operations. Moreover, miners — including iron ore giant Vale — have announced halts across their sites.

Considering Brazil is China’s second-largest iron ore supplier, its production can have significant implications for the iron ore price.

The potential benefit to Fortescue has ASX investors bidding up the iron ore juggernaut today.

Notably, Fortescue’s Pilbara-based mines are continuing their operations, which means the company can capture the higher commodity pricing.

However, commodity analysts are closely monitoring the other side of the pricing equation — demand. The Omicron COVID-19 variant could still impact demand for iron ore in China. Although, Mysteel Research & Consulting is forecasting China’s demand to hold firmly.

Broker’s take on Fortescue share price on the ASX

Recently, analysts over at Citi downgraded Fortescue based on its valuation. In a note, the broker placed a sell rating on Fortescue with a share price target of $17.20. This would suggest a potential downside of nearly 20%.

The Fortescue share price has performed strongly already this year. Fortescue shares are up 7.8% on a year-to-date basis.

The post Fortescue (ASX:FMG) share price up amid rainy days for Brazilian iron ore appeared first on The Motley Fool Australia.

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More reading

Goldman Sachs says buy Rio Tinto and South32 shares but sell Fortescue now

Why Domino’s, Fortescue, Medibank, and Metcash shares are falling

Leading brokers name 3 ASX shares to sell today

ASX 200 (ASX:XJO) midday update: Afterpay-Block deal approved, Fortescue downgraded

Why this top broker says the Fortescue (ASX:FMG) share price is overinflated

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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