The sudden collapse of iron ore prices sent the Fortescue Metals Group Limited (ASX: FMG) share price into free fall, down almost 20% in August to a 5 month low of $20.02.
Iron ore prices have rapidly deteriorated from record highs of ~US$230/t to around US$150/t after China pledged to reduce its 2021 steel output in an effort to curb carbon emissions.
Steel producers in major industrial provinces including Anhui, Gansu, Fujian, Jiangsu, Jiangxi, Shandong, and Yunnan were told to limit their production to 2020 volumes.
Iron ore markets have managed to find some support this week on steel demand optimism.
Bloomberg reported that China’s central bank chief viewed to “stabilise the supply of credit and boost the amount of money supporting smaller businesses and the real economy, after both credit and economic growth slowed in July”.
The prospect of accommodative policies might be why the Fortescue share price has managed to find some support around 5-month lows this week.
But looking ahead, analysts think there could be more pain for iron ore prices.
A bleak outlook for iron ore
According to an article featured on Mining.com, analysts Erik Hedbord and Richard Lu at commodities consultancy CRU Group said a further drop in iron ore prices is possible.
“CRU forecasts iron ore prices to decline further towards the end of the year, as we see a more balanced market with Chinese demand likely to stabilise for the rest of the year, while seaborne supply continues to improve,”.
Alongside stabilising demand from China, shipment volumes from iron ore producers in Australia typically improve in the fourth quarter, according to CRU analysts.
Fortescue share price snapshot
The Fortescue share price has tumbled well into negative territory, down 19.5% year-to-date.
The company is expected to release its FY21 full year results on Monday, 30 August.
The post Fortescue (ASX:FMG) share price tumbles in August, analysts see further declines in iron ore 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 August 16th 2021
More reading
- August hasn’t been a great month for the Fortescue (ASX:FMG) share price
- These 3 ASX 200 shares were the most heavily traded on Monday
- Pilbara Minerals (ASX:PLS) share price bounces back, up 8% on Monday
- Just how dependent is Fortescue Metals (ASX:FMG) on China?
- ASX 200 Weekly Wrap: Miners drag ASX back to earth
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/3mGCLwN
Leave a Reply