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Why the Fortescue (ASX:FMG) share price is up 4% today

Higher iron ore prices is driving Fortescue shares higher on Monday.
The post Why the Fortescue (ASX:FMG) share price is up 4% today appeared first on The Motley Fool Australia. –

The Fortescue Metals Group Limited (ASX: FMG) share price has scored a turnaround on Monday, bouncing 3.65% higher to $14.77.

Iron ore holding above US$120 a tonne

It was a quiet week for iron ore markets last week following China’s week-long National Day holiday which ran between 1 and 7 October.

Iron ore prices rallied last Friday, 8 October with improved trading liquidity and recovering demand according to Fastmarkets.

Spot prices were up US$6.36 or 5.4% to US$123.38 a tonne.

Chinese iron ore futures which trade on the Dalian Commodity Exchanges also opened higher on Monday.

The most active futures contracts for January 2022 are up 2.87% to 768 yuan (US$119) a tonne.

What’s the outlook for China?

China’s focus on emissions and energy consumption has headlined the recent decline of iron ore prices. In addition, weak Chinese economic data and concerns surrounding its real estate market continue to weigh on iron ore markets.

BHP Group Ltd (ASX: BHP) CEO Mike Henry spoke at the Financial Times Mining Summit last week, providing an upbeat view about China’s growth and demand outlook.

“The big-picture outlook for commodities remains really healthy both in China and globally, where we are starting to see a bit of a pick-up in inflation, as well, which has been spoken about.”

“Resources companies like BHP are right at the front end of that, and we are benefiting from that through prices for pretty much all of our commodities at this point,” he said.

Looking over at China’s housing market, Henry said “On the one hand, we are seeing pressure on housing starts, which will then impact on near-term steel demand.  On the other hand, activity on work underway remains very strong, and we are starting to see the pull-through to housing completions, which of course is going to bode well for copper demand.  So it is not all a bad news story.”

“Our long-term outlook for China, with continuing strong growth there, has not really changed.  We acknowledge that there are some near-term disruptions occurring that have impacted things like iron ore pricing, but that will work its way through the system in due course,” said Henry.

Fortescue share price snapshot

The Fortescue share price is down an ugly 40% year-to-date and down 12% in the past 12-months.

Encouragingly, it seems to have found a floor around the $14 level, coinciding with the recent rebound in iron ore prices.

The post Why the Fortescue (ASX:FMG) share price is up 4% today appeared first on The Motley Fool Australia.

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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.

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