Shares of Fortescue Metals Group Limited (ASX: FMG) have been crushed today after the iron ore price plummeted overnight. By early in the afternoon, Australia's third largest iron ore miner was trading 5% lower at just $2.17 per share.
So What: Iron ore fell to its lowest price since 2009, crashing below US$60 a tonne on the back of worrying data. To begin with, China predicted that its economy would grow at just 7 per cent in 2015, sharply below the 7.4 per cent growth achieved in 2014 with Chinese officials proclaiming slower economic development was the "new normal".
Meanwhile, data has also showed that a record amount of iron ore had been shipped from Port Hedland in February as Australia's iron ore miners continue to ramp up their production rates.
When combined, these forces are acting as a downward pressure on the iron ore price which is terrible news for Fortescue. While Fortescue has done a magnificent job thus far at cutting costs (thanks in large part to the falling Australian dollar and low oil prices), it still maintains far higher cost operations than its bigger rivals which include Rio Tinto Limited (ASX: RIO), BHP Billiton Limited (ASX: BHP) and Brazil's Vale.
Now What: Should the iron ore price fall any further, Fortescue could struggle to keep its head above water. One of the biggest concerns surrounding the stock is its enormous debt load. While the miner is busy trying to refinance its debts to ease some of the immediate pressure, investors are clearly seeing the stock as a high-risk prospect to avoid.
