FMG Share Price Down More than 4%: End of the Iron Ore Rush?

At time of writing, the share price of Fortescue Metals Group Ltd [ASX:FMG] is down 4.28%, trading at $9.62.

The FMG share price has taken a beating recently, along with other major iron ore miners, BHP Group Ltd [ASX:BHP] and Rio Tinto Ltd [ASX:RIO].

Let’s revisit the chart from last month, where I said if the FMG share price broke through this range, the long-term top was in:

fmg asx

Source: tradingview.com

It looks like an astute observation, for now. Today, we take a look at the latest iron ore news as markets get savaged by coronavirus fears.

Download your free report and learn about the earnings crisis facing Aussie iron ore stocks in 2020…and the mining companies to consider instead.

FMG share price reflects crisis in China, slowing global growth, but curiously not iron ore prices

The recent sell-off in FMG shares reflects its status as a blue chip mining stock.

In the panic that has ripped through markets recently, it has sold off.

The thought in the last FMG update we did, was that the coronavirus would feed through to Chinese factory output.

This despite the rosy picture FMG CEO Elizabeth Gaines painted in a Reuters interview in February.

And this is the latest China PMI, the lowest on record since the survey started in 2004:

FMG ASX

Source: Trading Economics

Meanwhile, the OECD has lowered its growth forecast from 2.9 to 2.4%, warning of it going as low as 1.5% should the virus outbreak become more intense.

Curiously, the iron ore price is actually holding up alright, rising gently since the beginning of March:

iron ore price

Source: Trading Economics

What’s going on with the iron ore price? And where to from here?

An explanation for the remarkable sturdiness of the iron ore price comes via the AFR:

Weak supply from the world’s five biggest exporters is not the only factor supporting iron ore prices, as Chinese steel production over the past month has been stronger than many expected amid efforts to contain the virus.

It is also worth noting that Chinese stockpiles of steel reinforcement bars exceeded 12 million tonnes for the first time.

Ever.

So there is this massive lag in the market that’s just been created.

Demand for steel could fall off further and then China has all this spare stock.

It’s just a theory, but you can see where things go from here for the iron ore price, hopefully.

If you want to see the RBA’s iron ore price forecast for 2020, you can find that in our in-depth look at the looming potential for an iron ore bear market.

Regards,

Lachlann Tierney,
For The Rum Rebellion

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