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- The shares of Fortescue Metals Group Ltd (ASX:FMG) are trading higher on the ASX, along with other iron ore miners.
- The recent upsurge in iron ore prices backed by robust Chinese demand is driving the share price of Fortescue higher.
- Iron ore prices are expected to rise for the rest of the year, potentially providing a boost to Australia’s biggest miners.
Iron ore miner Fortescue Metals Group Ltd (ASX:FMG) seems to be garnering considerable attention this morning as miners & banks lift the benchmark index to a new 13-month high in early morning trade. After being out of form over the last one month, Fortescue shares are having a pleasant day while trading approximately 2.3 per cent higher at AUD 20.950 (as at 10:55 AM AEST).
However, it’s not just Fortescue that is experiencing gains. The shares of other ASX-listed iron ore mining companies like Rio Tinto Limited (ASX:RIO), BHP Group Limited (ASX:BHP) and Iron Road Limited (ASX:IRD) are also trading in green territory. In fact, the broader mining sub-index, S&P/ASX 300 Metals and Mining (Industry), has added over 1.18 per cent in the early morning trade.
What’s Driving the Fortescue Share Price Higher?
Surging iron ore prices backed by record steel prices are giving a leg up to the shares of Fortescue and other iron ore miners. The iron ore price recently jumped above USD 170 a tonne, boosted by robust demand in China.
The steel prices in China climbed to record-high levels recently on concerns over supply restrictions in the world’s largest exporter and producer of construction and manufacturing material. The curbs on production in China’s top steelmaking city of Tangshan, coupled with strong demand, lent support to steel prices.
Related Read: China's iron ore imports skyrockets on robust demand
The price of iron ore appears to be rebounding from last month’s downtrend seen across the globe. March 2021 saw iron ore prices coming under pressure after Chinese authorities took the decision to limit the output for some steel mills based in Tangshan until the end of this year. The decision was made to curb surging pollution levels.
The move dampened down the market’s optimism over demand boost for iron ore in post-Lunar New Year in the world’s top steel producer. However, the recent recovery in Chinese demand seems to be changing the fate of the base metal.
What Lies Ahead for the Iron Ore Producer?
The recent forecasts suggest a brighter outlook for iron ore prices, which is anticipated to rule in favour of iron ore producers like Fortescue Metals Group Ltd.
S&P Global has lately upgraded its price assumption for iron ore from USD 100 a tonne to USD 130 a tonne for 2021. The firm has further upgraded its projection for 2022 from USD 80 a tonne to USD 100 a tonne. It anticipates the global demand to outstrip supply over the coming one to two years.
Furthermore, Australia’s Industry Department also expects the iron ore price to remain above USD 100 per tonne until late this year. However, the department also sees challenges from competitors like Africa and South America on the supply front, who can boost iron ore output over the coming years.
Australia’s biggest iron ore miners like Fortescue are likely to benefit from better-than-anticipated iron ore prices for at least the remaining months of 2021.