The Fortescue Metals Group Limited (ASX: FMG) share price is cratering amid plunging iron ore prices and weakening Chinese demand.
Shares in the iron ore giant continue to fall on Friday, down 8.29% at $15.82 in early trading.
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Fortescue share price hits fresh 12-month lows
Iron ore prices started the week at US$123.8 per tonne according to Fastmarkets.
By Thursday night, Fastmarkets reported that sustained demand weakness drove iron ore prices to just US$107.2 per tonne.
This means that prices have plunged more than 50% since May record highs of US$230 per tonne.
The last time iron ore traded near US$100 was around early August last year, broadly consistent with the Fortescue share price making fresh 12-month lows on Friday.
What's driving iron ore prices lower?
There's been a major slowdown in Chinese demand due to government restrictions on steel output in addition to broader weakness in industrial and construction activity.
S&P Global reported that China's August crude steel output fell 13% year-on-year and dropped 4.1% month-on-month to 80.24 million metric tonnes. Figures have not dropped this low since March 2020.
The report warned that China's crude steel output was likely to drop further in September and October, as major steelmaking provinces have been forced to widen steel output cuts to meet energy consumption guidelines.
In addition, it warned that "China's steel prices are unlikely to gain much momentum from output cuts in Q4, mainly because domestic demand has also softened due to a slowing property sector, according to sources".
Fortescue was able to leverage sky-high iron ore prices at the beginning of the year, but that is now unravelling as demand from China's key property and infrastructure wanes.
The Fortescue share price is down 36% year-to-date and has given back all its hard-earned gains from the past 12 months.
