Why the FMG share price is under pressure again today

Posted: 14 September 2021 1:28 pm
News
FMG-Shares-14Sept_1800x1000_Finder

Shares in iron ore miner Fortescue Metals Group have declined 17% in the last month.

Shares in iron ore miner Fortescue Metals Group (ASX: FMG) are among the most traded shares on the ASX boards on Tuesday. The stock was trading 1.5% lower at $18.13 at the time of writing.

What is weighing down the FMG stock price?

It is fair to say that last month hasn’t been great for Fortescue investors. The stock has lost more than 17% of its value since mid-August, with a number of reasons contributing to this slide.

One reason, as discussed previously, has been the hefty dividend that Australia’s third largest iron ore miner is paying out to its shareholders. The company declared a fully-franked final dividend of $2.11 a share, and accordingly the share price has dropped by that amount to reflect the payout to investors this month.

But the biggest contributor has been the continuing slide in iron ore prices. Overnight, spot prices for benchmark 62% fines product dropped another 4.6% to US$123.84 a tonne, the lowest point since December 2020.

The latest trigger seems to be China’s steel-producing province of Yunnan asking local mills to adjust production schedules to ensure the crude steel output falls in 2021. This comes after China vowed to limit crude steel output this year to curb industrial pollution.

Iron ore prices have now dropped more than 45% from their peak of US$237 a tonne in May. Prices of the steel making ingredient this year largely traded above US$200 a tonne between April and August due to a spike in demand in China and global supply constraints, which immensely benefited the big miners and contributed to the large dividends they have paid this year.

Cloudy outlook

But the market situation has clearly turned and analysts expect further declines. Estimates from the federal government indicate iron ore prices are set to ease over the second half of 2021, but should stay above US$100 a tonne until late-2022.

Despite its size, Fortescue is often considered more vulnerable to market volatility compared to its larger peers because of its slightly lower quality of ore. The company has sought to make up for this by blending its product with higher quality ore and shipping higher volumes.

Fortescue expects to maintain iron ore shipments in FY22 within a 180 million-185 million tonne range. However, it has forecast C1 production costs to rise slightly to US$15-$15.50 per wet metric tonne.

But the cloudy outlook for the miners has resulted in some investors booking profits or exiting their shares. The likely revising of analysts’ earnings estimates could cloud the outlook further, and Fortescue investors are hoping the bottom has been reached.

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Considering buying FMG shares?

If you are still keen to buy shares in Fortescue Metals, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site