Why does the Fortescue (ASX: FMG) share price drop 10% in 2021?
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It’s been a year back and forth for the Fortescue Metal Group Ltd. (ASX: FMG) share price.
The iron ore major made an extraordinary increase of around 55% between the end of November 2020 and the beginning of January of this year. As of January 8, Fortescue shares hit an all-time high of $ 26.40.
At its peak valuation, iron ore prices were around US $ 170 / tonne.
Fast forward to today, iron ore prices have climbed much higher, currently trading around US $ 210 / tonne. Fortescue’s stock price, meanwhile, is down 9.76% year-to-date, trading at $ 22.38 at market close today.
While iron ore prices remain high, why do Fortescue stocks continue to fall sideways?
Expectations that iron ore prices have peaked
the Australian Financial Review over the past week, a number of factors could push iron ore prices down in the short to medium term.
This included Brazil’s return to full production, a slowdown in Chinese consumption, extremely high prices prompting new projects to come online, and ways to produce steel less reliant on iron ore.
China attacks commodities
The Chinese economy hungry for raw materials is not satisfied with the exorbitant prices.
Last month, China announced plans to increase domestic iron ore production in response to apparent “unreasonable restrictions” on trade with Australia.
China also wants to improve its national management of raw materials to preserve price stability, investigate malicious transactions and crack down on suspicious pricing behavior.
Last Thursday, Yuan talks reported that China’s leading economic planner, the National Development and Reform Commission (NDRC), would release state reserves of copper, aluminum and zinc in open auctions.
The government body said it was willing to increase supply and stabilize prices by releasing more reserves in the future, depending on market conditions.
China’s most traded iron ore futures on the Dalian commodity exchange fell more than 6% yesterday after the NDRC said it would closely monitor iron ore markets to punish monopoly deals and verify abnormal transactions, speculation and the spread of false information to drive up prices.
As iron ore spot prices remain above the US $ 200 / tonne mark, it is possible that factors such as China’s crackdown on soaring prices and expectations that prices of iron ore could decline in the medium to long term, could weigh on the Fortescue share price. .
Fortescue stocks underperformed overall S & P / ASX 200 Index (ASX: XJO), slipping around 9.70% year-to-date.