Fortescue Metals Group Limited (ASX: FMG) continues to be weighed down by the crumbling iron ore price with the miner's shares slipping to a fresh six-year low today. Fortescue's shares traded as low as $1.89 before recovering marginally by mid-afternoon to trade at $1.93, down 4.5% for the day.
So What: Fortescue Metals Group has been stuck in a downward spiral over the last 12 months in which time the commodity's price has more than halved. While iron ore steadied overnight, it's still hovering near its lowest price in six years, fetching roughly US$58.50 a barrel according to the Metal Bulletin.
Despite its status as Australia's third largest iron ore miner and its efforts to reduce costs, Fortescue still maintains higher operating costs than rivals BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO). It also carries an enormous load of debt which will be difficult to repay should the commodity lose any more of its value.
Unfortunately, that scenario is looking increasingly likely. A slowdown in global demand, combined with a tide wave of fresh supplies, has prompted many analysts to suggest the iron ore price will continue to decline and could even trade below US$50 a tonne before the year is out. As such, an investment in a company like Fortescue today would be an incredibly risky move and long-term investors should steer clear.