Why the Fortescue Metals Group (FMG), RIO and BHP share prices are tumbling
Shares in ASX iron ore giants FMG, BHP and RIO are down as Chinese authorities impose trade limits on futures contracts.
- FMG and BHP share prices have fallen after hitting record highs on Monday.
- Chinese futures exchanges imposed margin trade restrictions on iron ore contracts.
- ASX200 is also down more than 1% after hitting a fresh record.
- Australia-China tensions sent iron ore prices rallying over supply concerns.
The Fortescue Metals Group (FMG) share price is in the red today, Tuesday, after hitting an all time high the day prior.
At the time of writing, FMG's share price had fallen more than 3.55% to $23.91.
It comes as the iron ore manufacturer's stock price rose as much as 6% on Monday after the price of iron ore snapped up a new historical high.
Other iron ore giants BHP and Rio Tinto similarly saw stock prices rise on Monday by more than 3%, with BHP likewise tapping a fresh record. It saw Australian listed miners reach their highest level since 2008.
Why is the FMG share price down?
Shares in iron ore producers FMG, BHP, Rio Tinto and Grange Resources Ltd are all down at the time of writing.
According to IG market analyst Kyle Rodda, there are likely two reasons.
"One, the iron ore price has pulled back after yesterday's ridiculous surge," Rodda told Finder. "An element of that is probably the increased margin requirements announced to trade iron ore futures yesterday."
Chinese commodities exchanges announced trading limits and increased margin requirements for iron ore futures contracts on Monday as prices continued to soar. As of midday, the iron ore price is down by around 1%.
Rodda said the other reason for the broad pull back is simply down to market dynamics.
"The drop in the mining stocks is relatively modest compared to yesterday's surge, and for probably a number of reasons, we are seeing a shift in market sentiment today to 'risk-off'," said Rodda.
"The materials sector is only slightly underperforming the broader ASX200 index, which is experiencing some relatively heavy selling today."
The benchmark S&P/ASX200 Index is down around 1.2% as of midday Tuesday after hitting its highest ever close on Monday of 7,172.8.
Why is iron ore rallying?
The price of iron ore has rallied in the last week thanks seemingly to concerns over supply issues amid a further deterioration in Australia-China relations.
Speculation over rising inflation and interest rates also added fuel to the fire, resulting in iron ore and steel futures hitting record highs.
Iron ore is Australia's biggest export and China is our top buyer.
Want to buy FMG shares?
To buy shares in Fortescue, you'll need to be signed up to a broker with access to the Australian Securities Exchange (ASX).
Your cheapest option is to use an online share trading platform. Be sure to compare your options to ensure you've got the right one for you.
It also pays to be aware that Fortescue pays a bi-annual dividend and offers a dividend reinvestment scheme. This means you can choose to reinvest your dividends automatically into new FMG shares.
You can usually apply for the scheme directly through your broker or by applying through the Fortescue Metals share registry.
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