The Fortescue Metals Group Limited (ASX: FMG) share price has been hammered by investors over the past 2 months. This comes as the mining company is facing a challenging year as the spot price of iron ore drops.
In early trading on Thursday, the Fortescue share price is up 1.69% to $15.05. Shareholders are feeling the pain of a 39.6% drop in just 2 months. The shares closed at $24.91 on 30 July.
Fortescue is now trading at levels not seen since July 2020.
Image source: Getty Images
What's dragging Fortescue shares lower?
It's no secret that the falling iron ore price has impacted Fortescue and other miners alike. The steel-making ingredient is fetching US$119.89 a tonne, plunging a mammoth 44% in just 2 months.
The Fortescue share price has mimicked the price of iron ore, sinking almost 40% over the same period. The two are strongly aligned as the company is primarily focused on mining and exporting iron ore to overseas markets.
At the same time, Fortescue's biggest customer, China has chosen to reduce its reliance on Australian resources, affecting demand on iron ore. This has led to a bearish outlook for the commodity to reach about US$91 a tonne in 2022, according to Bank of America.
Nonetheless, Fortescue will still be churning out profits as it boasts one of the lowest iron ore costs in the world. The Pilbara producer is mining, processing and exporting iron ore at roughly AU$40 per tonne (US$29). That still represents a sizeable margin for the company.
In addition, the broader market weakness has also hindered the Fortescue share price. The S&P/ASX 200 Index (ASX: XJO) is down 3.24% in the past month, and 4.46% off its record high of 7,632.8 points.
At the time of writing, the benchmark index is 7,292 points.
Fortescue share price snapshot
Up until the end of July, Fortescue shareholders were enjoying strong gains. The share price hit an all-time high of $26.58.
That all came crashing down in August and September, with its shares touching as low as $14.15 on 20 September.
On valuation grounds, Fortescue commands a market capitalisation of roughly $46.3 billion. It has approximately 3.1 billion shares on issue.
