Why did the Fortescue share price leap 5% on Wednesday?

Happy woman miner with her thumb up signalling Wyloo's commitment to back IGO's takeover of Western Areas nickelHappy woman miner with her thumb up signalling Wyloo's commitment to back IGO's takeover of Western Areas nickel

The Fortescue Metals Group Limited (ASX: FMG) share price finished in the green today.

The mining giant’s share price closed 5.23% higher on Wednesday at $17.90. For perspective, the S&P/ASX 200 Index (ASX: XJO) also climbed 1.65% today.

Let’s take a look at what happened to the Fortescue Metals share price today.

Iron ore futures rise

The company’s shares lifted amid a positive day for the materials sector.

Indeed, Fortescue was not the only exploration company to rise today. The share price of BHP Group Ltd (ASX: BHP) increased 1.37% while Rio Tinto (ASX: RIO) shares gained 2.18%.

The S&P/ASX 200 Materials Index (ASX: XMJ) also rose 2.5% today. ASX 200 lithium shares, in particular, lifted today amid concerns of a shortage of battery materials.

Meantime, it was reported iron ore prices may be buoyed by lower production guidance from Brazilian iron ore giant Vale SA (NYSE: VALE), according to Bloomberg. This may support commodity prices for iron ore and present an opportunity for competitors, the publication noted.

Iron ore futures in Singapore lifted by 2.8% while Dalian Commodity Exchange futures gained 1.5% in Asian markets, Bloomberg reported.

Jeffries analysts predicted demand for iron ore will increase due to the impacts of China’s stimulus. The broker said in comments cited by Bloomberg:

Based on our analysis, iron ore and coal should be the best of the major commodities in mining for the rest of this year.

However, as my Foolish colleague James reported yesterday, Goldman Sachs analysts are predicting iron ore prices to lower in 2023 to US$100 per tonne. But, for 2022, Goldman has placed a US$120 per tonne price forecast on iron ore.

Share price snapshot

The Fortescue share price has lost nearly 29% in the past year, while it has shed nearly 7% year to date.

For perspective, the benchmark ASX 200 index has lost nearly 7% in the past year.

Fortescue has a market capitalisation of more than $55.1 billion based on the current share price.

The post Why did the Fortescue share price leap 5% on Wednesday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea 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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