A sudden collapse in iron ore prices has tipped the Fortescue Metals Group Ltd (AS:X FMG) share price off a cliff.
Shares in the iron ore major have tanked 8% in the last week and are down 15% since all-time highs of $26.48 on 29 July.
Iron ore prices fall below US$200/tonne
Iron ore prices were standing tall at the end of July, with spot prices trading at around US$210/tonne according to Market Index.
However, prices would quickly deteriorate to below US$170/tonne this week.
China is headlining the weakness in iron ore prices, with its government requesting that steel mills produce no more than their 2020 volumes, according to Mining.com.
Chinese steel production in the first half lifted almost 12% compared to 2020 figures, suggesting a significant cutback is needed.
More recently, Mining.com flagged that China’s iron ore demand might continue to remain weak in the near term, ahead of its Beijing Winter Olympic Games in February 2022.
It claims, “Steel hub Tangshan will extend existing curbs to March 13 next year to ensure good air quality for the Games, researcher Mysteel reported, citing a draft document issued by the city’s environmental office.”
The article pointed to Beijing’s 2008 Olympics, where authorities shut down a number of industrial operations near the capital.
While output came to a grinding halt, the city enjoyed “blue skies for an entire month”.
This isn’t the first time
Between 26 February and 22 March, the Fortescue share price experienced a 23% drawdown under similar circumstances.
Tangshan, one of China’s most polluted cities, was ordered to limit or halt production on certain days to reduce its emissions of air pollutants.
Fortescue share price snapshot
The Fortescue share price is down 9.23% year-to-date, greatly underperforming both the S&P/ASX 200 Index (ASX: XJO) and ASX 200 Materials Index (INDEXASX: XMJ) which have rallied 13.7% and 13.08% respectively.
A catalyst on the horizon for Fortescue shareholders is its FY21 results.
The highly anticipated announcement is expected to land on 30 August.
The post The Fortescue (ASX:FMG) share price is down 8% in a week. Here’s why appeared first on The Motley Fool Australia.
Should you invest $1,000 in Fortescue right now?
Before you consider Fortescue, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Fortescue wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of May 24th 2021
More reading
- Afterpay and Zip were among the most traded ASX shares last week
- How does the Rio Tinto (ASX:RIO) dividend compare to the materials sector?
- ASX 200 shares could get boost on prediction that A$ will crash to US68c
- Why the Fortescue (ASX:FMG) share price plunged 15% from all-time highs
- How is the Mineral Resources (ASX:MIN) share price holding up against the materials sector?
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.
from The Motley Fool Australia https://ift.tt/2VKqcWb
Leave a Reply