Why the Fortescue (ASX:FMG) share price is down 5% today

Upset man in hard hat puts hand over face

The Fortescue Metals Group Ltd (ASX: FMG) share price is having a hard time digging itself out of its recent rut.

Fortescue shares managed to eke out some gains this morning, opening 0.32% higher to $15.80.

But by the time Chinese iron ore futures markets began trading around 11 am, Fortescue’s gains faded and snowballed to steep losses.

At the time of writing, the Fortescue share price is trading 5.21% lower at $14.93.

Iron ore spot prices rise but futures tumble

Benchmark iron ore prices rallied strongly on Monday, rising 6.2% to US$119.31 a tonne.

According to Fastmarkets, buying activity picked up due to pre-holiday restocking activities ahead of China’s National Day which runs between 1 to 7 October.

As such, the Fortescue share price rallied 2.67% on Monday to $15.75.

On the flip side, benchmark iron ore futures on China’s Dalian Commodity Exchange, for January delivery, plunged on open this morning, diving 4.3% to around 670 yuan a tonne (US$103.7).

Chinese power curbs intensify

China is in the midst of a power supply crisis where 16 of its 31 provincial-level jurisdictions are rationing electricity after failing to make progress earlier in the year, according to the South China Morning Post.

Meanwhile, its crisis has driven up the price of energy commodities such as coal, oil and LNG, some of which are surging to all-time highs.

However, the power cuts and China’s broader carbon goals have forced smelters to curb production, reducing their demand for iron ore.

Mining.com reported that capacity utilisation rates for 247 blast furnaces at steel plants continued to ease. Utilisation rates across China stood at 82.06% last week, down from 83.74% the week earlier.

Fortescue share price snapshot

Things were looking promising for Fortescue, rallying above $16 last Thursday.

Unfortunately, the mounting pressures across China’s energy crackdown, Evergrande crisis and growth outlook have kept comeback hopes at bay.

The Fortescue share price is down 39.8% year-to-date and down 5.8% in the last 12-months.

The post Why the Fortescue (ASX:FMG) share price is down 5% today appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

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/3kNOSHm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s