Here’s why Fortescue Metals (ASX:FMG) shares are trading at YTD-lows

Highlights

  • Fortescue Metals Group Limited(ASX:FMG) traded at YTD lows of 25.57% on Thursday.
  • The share price of FMG is governed by the dynamics of global iron ore prices.
  • The government bodies in China have asked local producers in Yunnan province to limit the production of steel, aluminium, and other products.

The Fortescue Metals Group Limited (ASX:FMG) share price is struggling to rise this week amid new stringent steel production curbs in China. The share price of the world's fourth largest iron ore producer closed at YTD lows of 26.38% to trade at AU$17.25 per share, down 3.199% as of 16 September 2021.

The share price of Western Australia-focused miner slumped as much as 20.26% in the last one month and gained merely 0.58% in the last 52-weeks.

The lingering performance of FMG is primarily attributed to a fall in global iron ore prices that have tumbled nearly 11.32% in the last one week.

Related Article: Why is FMG trading near 5-month low; where are iron ore prices heading?

Let us understand why iron ore prices are falling and how it impacts FMG’s share price movement.

FMG share price fall

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Falling Iron Ore prices

Iron ore is the primary business of Fortescue Metals. FMG is engaged in the exploration, development, and production of iron ore with most of the operations located in Western Australia.

Iron ore being the primary business of FMG, its share price is governed by the dynamics of global iron ore prices, which is decided by the demand and supply game of the base metal.

Related Article: Ride the iron ore rally with these 10 ASX-listed stocks

Currently, the Spot prices of iron ore with 63.5% iron content are trading near US$117.5 per tonne, the level last seen in November 2020. The industrial production in China increased merely 5.3% y-o-y in August 2021, the lowest since July 2020. The prices of iron ore have been struggling hard since hitting the record high level of US$230 per tonne in May, amid new steel production curbs in the country to limit its greenhouse emission, as a part of its long-term goal to attain carbon neutrality.

Related Article: Iron ore prices on move: Seven ASX stocks in focus

Fresh Production Curbs

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Furthermore, the government bodies in China have asked local producers in Yunnan province to limit the production of steel, aluminium, and other products, to limit their carbon emissions. The province contributes about 2.3% of the total crude steel production in the country.

Global financial analysts including JPMorgan have recently reduced their forecast for 2021 iron ore prices to US$165 per tonne from US$181 per tonne.

Must Watch: Why Mining Stocks BHP, Rio Tinto, Fortescue are leading market losses?

Bottom Line:

China's fresh move to limit steel and aluminium production has reduced the demand for iron ore and weighted its price, putting pressure on the stock prices of iron ore miners across the globe.

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