The Fortescue (ASX:FMG) share price is down 13% so far this month

The miner's shares have fallen off a cliff since July highs.

| More on:
Two young men jump off a cliff into the water.

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

The Fortescue Metals Group Limited (ASX: FMG) share price has been on a continuing decline since late July.

Shares in the world's fourth-largest iron ore miner have come under pressure amid the plunging spot price for the steel-making ingredient.

At Friday's market close, Fortescue shares ended the day at $18.27. This means that its shares are now down 13% for this month alone.

More on the iron ore spot price

After touching a record high of US$219.77 per tonne in July, the iron ore spot price fell off a cliff. Chinese policymakers laid down the rules for its steel producers in an effort to curb reliance on Australian iron ore.

Chinese mills were instructed to limit 2021 output to no more than 2020 levels, or face harsh consequences.

As such, the current iron ore price has dropped to US$133.82, a descent of almost 7% in September. But how will this affect the Fortescue share price?

What does this mean for Fortescue?

The sharp decrease will no doubt have an impact on Fortescue's bottom line; however, profits are still expected to be churned out.

In its full-year results released last month, Fortescue reported its highest-ever annual shipments of 182.2 million tonne of iron ore. Coupled with its industry-leading C1 costs of US$13.93 per wet metric tonne, this still translates to bumper profits.

The company is forecasting to maintain iron ore shipments for FY22, with a guidance of 180 million to 185 million tonne.

C1 costs are expected to rise slightly to US$15-US$15.50 per wet metric tonne (based on assumed average exchange rate of AUD:USD 0.75).

Only time will tell if Fortescue can achieve the above guidance, despite its strong dependence on the Chinese market. If it does miss the mark however, its shares could tumble further.

Fortescue share price summary

It has been a rollercoaster ride for Fortescue investors, with its shares reaching all-time highs before sinking to near 52-week lows.

Over the last 12 months, the company's share price has moved just 2% higher, with year-to-date down more than 20%.

Fortescue has a market capitalisation of around $56.2 billion and approximately 3 billion shares on its books.

Motley Fool contributor Aaron Teboneras 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 Share Market News

A young woman smiles as she rides a zip line high above the trees.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a bountiful session for investors this hump day.

Read more »

An excited man stretches his arms out above his head as he reaches a mountain peak.
Record Highs

Breaking: CBA shares hit a new record of $180

CBA shares can't possibly keep rising can they?

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
52-Week Highs

Guess which ASX 200 furniture retailer is up 400% in 5 years?

Up 400% over the past five years is not bad for a furniture retailer. Here's why this quiet compounder has…

Read more »

Arrows pointing upwards with a man pointing his finger at one.
Share Market News

Morgans says these ASX stocks can rise 30% to 80%

These shares could be cheap according to the broker. Let's see what it is saying.

Read more »

Two people shaking hands in the boardroom on a merger.
Mergers & Acquisitions

What did Macquarie make of the Brickworks and Soul Patts merger?

Macquarie sees simplification, scale, and upside… but it also has a warning..

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Mergers & Acquisitions

PointsBet share price surges 11% on improved takeover offer

The bidding war for PointsBet shares continues apace today.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Leading broker tips 50%+ upside for IDP Education shares

The team at Macquarie thinks this beaten down stock could be a buy.

Read more »

Man looking happy and excited as he looks at his mobile phone.
Share Gainers

Why Coronado, DroneShield, Lovisa, and Mayne Pharma shares are racing higher today

These shares are having a good time on hump day. But why?

Read more »