Down 12% in a month, is the Fortescue share price a buy?

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share pricesA Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices

Shares in Fortescue Metals Group Limited (ASX: FMG) have tumbled in the past month. In fact, just a few days ago on Friday, the Fortescue share price hit an 8-month low.

The world’s fourth largest iron ore miner’s shares have come under significant selling pressure amid lower iron ore prices.

At the time of writing, the Fortescue share price is up 1.35% at $16.55.

This means the company’s shares are now down 11.02% since this time last month.

Fortescue faces tough trading conditions

The severe drop-off in iron ore prices is negatively impacting Fortescue shares as well as the broader S&P/ASX 200 Resources (ASX: XJR) index. As of Friday, the latter was also down by around 12% over the past month.

On 17 June, the steel-making ingredient was fetching US$135.69 per tonne.

However, a downbeat outlook on Chinese demand led the iron ore price to sink to year-to-date lows of under US$100 on Friday.

This represents a fall of more than 20% in just one month and over 50% in the past year.

Furthermore, as reported by my Fool colleague late last week, a cautious outlook on the mining sector by UBS could be further weighing on Fortescue shares.

The broker has a neutral rating with a price target of $16 a pop. This appears to be in line with what investors currently deem to be fair value for Fortescue shares.

UBS noted that higher all-in sustaining costs (AISCs) across the board would likely hit mining profits. Subsequently, this could lead to a number of miners missing their production guidance targets.

Where iron ore prices, and subsequently the Fortescue share price, go from here largely depend on what happens to China’s economy.

Ongoing COVID-19 outbreaks, as well as a cutback on steel production, are having a negative effect on the iron ore industry. The Chinese government is trying to negate these effects with stimulus packages but appears not to have had much of an impact so far.

On top of that, a potential global recession is also overshadowing the market.

Fortescue share price summary

Wild price swings have been the norm for the Fortescue share price in 2022 – down 14%.

After touching a record high of $26.58 on 29 July last year, its shares dropped to a 52-week low of $13.90 in October.

Fortescue has a market capitalisation of around $50.96 billion.

The post Down 12% in a month, is the Fortescue share price a buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 Scott Phillips.

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