Stock of the day: Fortescue Metals Group
Fortescue experiences stock decline as iron ore prices fall below $100, driven by weakening demand from China and economic uncertainties.
[AI generated]
This video was created on 3 September for IG audiences by ausbiz.
Stock of the day: Fortescue (ASX:FMG)
Iron ore prices dip below $100
Fortescue Metals Group has been under pressure as iron ore prices fell below $100 overnight, settling at $96.95. The price has dropped 23% since the beginning of 2024, driven primarily by weaker demand from China due to slowing economic activity. This decline has significantly impacted Australian mining stocks, with Fortescue's shares down 38% since early January.
China's economic outlook and its impact on iron ore
China's economic situation is a major concern. Recent reports from companies like A2 Milk, which are exposed to the Chinese market, highlight the pressures on the country. These pressures are also affecting the steel and iron ore prices. Fortescue is attempting to add value beyond just the spot price of iron ore by focusing on green steel initiatives. However, the performance of its stock is still largely dictated by iron ore prices.
China's property market issues and declining birth rate pose long-term challenges for iron ore demand. The short-term problem is China's property market, which has created a surplus of assets for a shrinking population. The longer-term concern is the forecasted decline in China’s population from 1.45 billion to 760 million by 2100.
Is this the bottom of the cycle?
Recently, one of Fortescue's largest shareholders, Capital Group, sold its entire stake. This was one of the largest block trades on the Australian market this year.
Analysts often suggest buying cyclical stocks at the bottom of the cycle. However, when the commodity prices are low, investors hesitate, fearing they could drop further. The big question now is whether we have reached the bottom of this cycle.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Explore the markets with our free course
Discover the range of markets you can trade CFDs on - and learn how they work - with IG Academy's online course.
Turn knowledge into success
Practice makes perfect. Take what you’ve learned in this shares strategy article, and try it out in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account. Upgrading is quick and simple.
- Trade over 13,000 popular global stocks
- Protect your capital with risk management tools
- Deal on 70 key US stocks out-of-hours, so you can react to news
Inspired to trade?
Put the knowledge you’ve gained from this article into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
