Fortescue (ASX:FMG) share price up 3% as iron ore prices edge higher

Oil worker drilling on the oil field

The Fortescue Metals Group Limited (ASX: FMG) share price is bouncing higher on the last trading session of the September quarter.

At the time of writing, shares in the iron ore major are trading 3.21% higher to $15.28 after a volatile week for the broader equity markets.

Iron ore markets are showing mixed results, with spot prices running higher despite weak manufacturing output in China.

Fortescue share price lifts amid higher iron ore prices

Iron ore prices inched up on Wednesday as Chinese steel mills continued to restock inventories ahead of its week-long national holiday.

According to Fastmarkets, iron ore prices added 1.84% to US$114.13 a tonne but it’s still lower than what it was fetching at the beginning of the week, at US$119.31 a tonne.

Another piece of good news for the Fortescue share price is the performance of Chinese iron ore futures traded on the Dalian Commodity Exchange.

The most active futures contracts for January 2022 delivery surged 7.15% this morning to around 732 yuan (US$111) a tonne.

Slowing iron ore demand in China

Chinese iron ore demand remains constrained as the country handles a major energy crisis which has halted production across major industrial hubs.

Beyond production woes, the country is experiencing a shift in the raw materials used for steel.

According to S&P Global, China continues to see an uptrend in steel scrap consumption, which requires much less energy than smelting iron ore for steel products.

The National Development and Reform Commission sees China’s 2025 steel scrap usage rising to 320 million mt on carbon neutrality goal, its latest data showed. China used 260 million mt steel scrap back in 2020, replacing 410 million mt 62% iron ore.

This trend adds to the mounting challenges for iron ore as China continues to focus on emissions targets and lowering steel outputs.

Despite trading 2.16% higher today, the Fortescue share price remains in negative territory week-on-week, down 1.37%.

The post Fortescue (ASX:FMG) share price up 3% as iron ore prices edge higher 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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