Why is the Fortescue (ASX:FMG) share price sliding 10% in 2021?

Despite iron ore prices sitting at record levels, Fortescue shares have gone nowhere in 2021.

| More on:
builder peeking over board as if watching asx share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Its been a forwards and backwards year for the Fortescue Metals Group Ltd (ASX: FMG) share price.

The iron ore major staged an extraordinary ~55% run between late November 2020 and early January this year. By 8 January, Fortescue shares had hit an all-time record high of $26.40.

At its record valuation, iron ore prices were fetching roughly US$170/tonne.

Fast forward to today, iron ore prices have surged much higher, currently trading around US$210/tonne. The Fortescue share price, meanwhile, is down 9.76% year-to-date, trading at $22.38 at the market close today.

With iron ore prices standing tall, why do Fortescue shares continue to slide sideways?

Expectations that iron ore prices have peaked

The Australian Financial Review last week reported a number of factors that could drive iron ore prices lower in the short to medium term.

This included Brazil moving back to full production, a slowdown in Chinese consumption, sky high prices incentivising new projects to come online and less iron ore dependent ways to produce steel.

China clamps down on commodities

China's commodity hungry economy is not happy with sky high prices.

Last month, China announced plans to increase domestic iron ore production in response to apparent "unreasonable restrictions" on trade with Australia.

China also wants to improve its domestic management of commodities to safeguard price stability, investigate malicious trading and crackdown on suspicious pricing behaviours.

Last Thursday, Yuan Talks reported that China's top economic planner, the National Development and Reform Commission (NDRC), would release state reserves of copper, aluminium and zinc in open auctions.

The government body said that it was willing to increase supply and stabilise prices by releasing more reserves in the future, based on market conditions.

Yesterday, China's most-traded iron ore futures contracts in the Dalian Commodity Exchange tanked more than 6% after the NDRC said it would closely monitor iron ore markets to punish monopolistic agreements and check for abnormal transactions, speculation, and the spread of false information to drive up prices.

Foolish takeaway

While iron ore spot prices are holding above the US$200/tonne mark, it's possible that factors including China's clampdown on surging prices, and expectations that iron ore prices could go lower in the medium to long term, could be weighing down the Fortescue share price.

Fortescue shares have underperformed the broader S&P/ASX 200 Index (ASX: XJO), sliding by about 9.70% year-to-date.

Should you invest $1,000 in Tpg Telecom Limited right now?

Before you buy Tpg Telecom Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Tpg Telecom Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Kerry Sun 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 Bruce Jackson.

More on Resources Shares

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Resources Shares

Did you catch what happened with the big 3 ASX 200 mining stocks in April?

BHP, Rio Tinto, and Fortescue all reported their latest mining results in April.

Read more »

Miner looking at a tablet.
Resources Shares

After its earnings result, what's Macquarie's price target on Fortescue shares?

Let’s dig into what Macquarie thinks of Fortescue after its quarterly update.

Read more »

Two mining workers on a laptop at a mine site.
Resources Shares

The Mineral Resources share price is down 72% in a year. Time to pounce?

Two top experts ran their slide rules over Mineral Resources shares. Here’s what they found.

Read more »

Miner looking at a tablet.
Resources Shares

Mineral Resources share price shoots 15% higher on third-quarter report

The ASX 200 iron ore and lithium giant has released its 3Q FY25 activities report.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why Macquarie says this ASX 200 mining stock could rocket 67% in a year

Macquarie forecasts a big potential rebound for this diversified ASX 200 miner.

Read more »

Female miner smiling at a mine site.
Resources Shares

3 reasons why the Fortescue share price could still be a buy

Here’s why I view Fortescue as an opportunity.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

Here's the latest earnings forecast out to 2029 for Rio Tinto shares

Let’s unearth what this mining giant is predicted to achieve.

Read more »

Female miner smiling in front of a mining vehicle.
Resources Shares

Is the BHP share price a buy? Here's UBS' view

Let’s dig into what an expert thinks of this mining giant.

Read more »