Fortescue shares can’t seem to catch a break, marking fresh 12-month lows on Friday.
The post Why the Fortescue (ASX:FMG) share price is down 8% today appeared first on The Motley Fool Australia. –
The Fortescue Metals Group Limited (ASX: FMG) share price is cratering amid plunging iron ore prices and weakening Chinese demand.
Shares in the iron ore giant continue to fall on Friday, down 8.29% at $15.82 in early trading.
Fortescue share price hits fresh 12-month lows
Iron ore prices started the week at US$123.8 per tonne according to Fastmarkets.
By Thursday night, Fastmarkets reported that sustained demand weakness drove iron ore prices to just US$107.2 per tonne.
This means that prices have plunged more than 50% since May record highs of US$230 per tonne.
The last time iron ore traded near US$100 was around early August last year, broadly consistent with the Fortescue share price making fresh 12-month lows on Friday.
What’s driving iron ore prices lower?
There’s been a major slowdown in Chinese demand due to government restrictions on steel output in addition to broader weakness in industrial and construction activity.
S&P Global reported that China’s August crude steel output fell 13% year-on-year and dropped 4.1% month-on-month to 80.24 million metric tonnes. Figures have not dropped this low since March 2020.
The report warned that China’s crude steel output was likely to drop further in September and October, as major steelmaking provinces have been forced to widen steel output cuts to meet energy consumption guidelines.
In addition, it warned that “China’s steel prices are unlikely to gain much momentum from output cuts in Q4, mainly because domestic demand has also softened due to a slowing property sector, according to sources”.
Fortescue was able to leverage sky-high iron ore prices at the beginning of the year, but that is now unravelling as demand from China’s key property and infrastructure wanes.
The Fortescue share price is down 36% year-to-date and has given back all its hard-earned gains from the past 12 months.
Should you invest $1,000 in Fortescue right now?
Before you consider Fortescue , you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Fortescue wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Fortescue (ASX:FMG) share price down as Chinese steel cuts speed up
ASX 200 resources giants lift despite plummeting iron ore price
Motley Fool contributor Kerry Sun 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.