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Highlights:
- Fortescue has lost more than 6% in last five trading days.
- The iron ore miner’s share price is likely getting affected by the commodity market upheavals.
- Fortescue is setting its foot into the green mining business via Fortescue Future Industries.
Weakness in commodity prices globally has started to take a toll on material and energy sector stocks. As the price of major raw materials like iron ore and copper are declining, the ASX200 Materials sector index (XMJ) has lost over 4.96% in last five days. Stocks have dipped 0.23% by noon and major companies like Fortescue Metals Group Ltd (ASX:FMG), Rio Tinto Ltd (ASX:RIO) and Champion Iron (ASX:CIA) are suffering.
FMG’s share price performance
Fortescue Metals Group's share price is down about 0.434% at 2:36 PM AEST today (24 June). In last five trade sessions FMG share price has lost more than 6%. FMG share price is tripping despite any new price sensitive announcements by the company recently. Meanwhile a major influencer seems to be the iron ore price.
What is wrong with Iron ore prices?
Image Source- © Xuejingwen | Megapixl.com
Iron ore prices have been lower since last few days. In a week’s time, the red metal’s price is down nearly 6%. The commodity price is weak amid global recessionary fears amongst commodity investors and the ongoing supply chain issues.
China is one of the largest importers of iron ore in the world. It consumes the red metal primarily to manufacture steel, of which it is a top exporter. Since the ongoing Covid situation is increasing the economic pressure on China, investors are keeping the red metal on their radar.
Also reportedly, China has indicated it may monopolise iron ore imports to cut down the industrial metal’s price. This would mean that China Iron and Steel Association joining hands with state-owned steel groups, to help both groups set lower prices.
The dragon, being a big-time iron importer, holds almost 70% share of the total global annual iron ore purchases. If China succeeds in implementing the plan, iron ore prices will probably move down further. It might also impact Fortescue shares as investors would perceive lower profits.
How is Fortescue moving ahead?
Fortescue Metals has previously declared a green transition in its business. The company revealed plans to change its leadership board and making Andrew Forrest AO as the Executive Chairman to oversee the business transition. Fortescue is hopeful about becoming a vertically integrated green energy business.
Recently, Fortescue Metals announced a partnership with global equipment manufacturer Liebherr for development and supply of green mining haul trucks. It was supposed to integrate with the zero emission power system technologies under joint development efforts of Fortescue Future Industries (FFI) and Williams Advanced Engineering (WAE). The agreement with Liebherr reportedly marked a significant step in the delivery of Fortescue’s industry leading decarbonisation targets.
The company seems to be slowly shifting focus toward the green mining industry. However, how far the transition can help Fortescue is one watch worthy scenario for investors in the long term.
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