The Fortescue Metals Group Limited (ASX: FMG) share price has fallen 31% since May, as commodity prices continue to fall.
FMG share price versus ASX200
As can be seen above, it's been a tumultuous run for Fortescue shareholders. Compared to the broader market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), the Fortescue share price is down more than 30%.
Ouch.
What's going on?
Fortescue isn't the only mining company seeing red. BHP Billiton Limited (ASX: BHP) shares and Rio Tinto Limited (ASX: RIO) shares have also been sold down, though not nearly as much.
Fortescue is a pure-play iron ore miner, so the first question we should ask is, 'has anything happened to the iron ore price?'
At the end of March, iron ore was trading for $US87.20 per tonne in Chinese ports, according to Indexmundi.com. Today, it fetches $US56.82 per tonne – 34% less.
Worse still, Fortescue's product is lower quality so it generally trades for a lower price than the benchmark iron ore.
Clearly, Fortescue shares are being sold down as the price for its number-one product, iron ore, falls away.
Foolish Takeaway
Fortescue is doing all the right things (paying down debt, lowering costs, etc.) but it cannot set the price it receives for its only product. Therefore, its share price is at the mercy of global iron ore markets.
As I said earlier today, that makes it hard for any investor to have an 'edge' when they are evaluating its shares.
I'm not a buyer of Fortescue shares.
