Why the Fortescue (ASX:FMG) share price is struggling this week

The mining giant’s shares are having a tough time of late…
The post Why the Fortescue (ASX:FMG) share price is struggling this week appeared first on The Motley Fool Australia. –

The Fortescue Metals Group Limited (ASX: FMG) share price is down almost 7% since this time last week.

At Wednesday’s market close, however, the miner’s shares broke their negative trend to finish slightly higher at $24.09, up 0.38%.

Here are some possible catalysts that could be dragging down the Fortescue share price.

Spot price of iron ore plummets

After spending the last couple of months above the US$200 barrier, the iron ore spot price has dramatically fallen.

Courtesy of Markets Insider, the steel-making ingredient is trading at US$181.01 per metric tonne as of last night. This represents a fall of close to 16% over the course of the week. It’s worth pointing out that the price of iron ore surged to a record high of US$219.77 in July.

The sharp decrease will have an impact on Fortescue’s bottom line, however, profits are still expected to be churned out. The company reported C1 costs of US$15.23 per wet metric tonne for Q4 FY21. C1 costs refer to the ‘direct’ production costs incurred in mining and processing the iron ore.

China signals end of reliance

Another possible factor weighing on the price of iron ore, and arguably the Fortescue share price, may have been China’s latest rhetoric.

The Asian country has directed some steel producers to cut down on production, in an effort to drive domestic demand. According to CNBC, Chinese mills will need to limit 2021’s output to no more than the volume recorded in 2020.

This is a difficult task as production volumes lifted 12% in the first half compared to the same period in 2020. This means the second half is likely to be lower than H2 FY20 levels.

In the month of May, China produced a monthly record of 99.45 million tonnes of steel. In June, that number dropped 5.7% to 93.88 million tonnes.

There are also concerns that if steelmakers don’t comply with the government’s latest rules, they will face retribution. Officials have warned that failure to comply may result in punishments such as potentially large fines.

Fortescue share price review

While relatively flat year to date, Fortescue shares have gained more than 30% over the last 12 months.

Based on valuation grounds, the company presides a market capitalisation of approximately $74.1 billion.

Fortescue is scheduled to report its FY21 results on 30 August 2021.

The post Why the Fortescue (ASX:FMG) share price is struggling this week appeared first on The Motley Fool Australia.

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 May 24th 2021

More reading

4 reasons why the Fortescue (ASX:FMG) share price could still be attractive
Why the Fortescue (ASX:FMG) share price has fallen off a cliff
Why ASX lithium shares are beating the iron ore majors – again

This leading broker believes Fortescue Metals (ASX:FMG) shares can lift
Own Fortescue (ASX:FMG) shares? Here’s what to look for during reporting season

Motley Fool contributor Aaron Teboneras 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.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!