3 reasons why the Fortescue Metals share price is up today

The Fortescue Metals Group Limited (ASX: FMG) share price has jumped 5.1% to $2.785 in lunchtime trading today and is now up more than 34% in the past month.

Here are 3 reasons why the share price is soaring…

  1. The spot iron ore price leapt by 4.7% to US$56.09 a tonne overnight, according to Metal Bulletin. So far this year, the commodity is up 28%, defying the bears’ gloomy forecasts. And there are signs it could rise again tonight, with the iron ore futures contract rising 5.8%.
  2. In news that could have contributed to the rising iron ore price, Brazil’s Vale, the world’s largest iron ore producer said it could lose as much as 100 million tonnes of annual iron ore output over the next three years due to pending environmental licences. In an email to Reuters, the company says licences for 88 projects were still being analysed. The miner also said that cuts could come as soon as next month, with its 30 million tonne Brucutu mine requiring a licence for a connected dam.
  3. Investors betting on a fall in Fortescue’s share price (shorters) are being forced to buy shares to cover their positions after the share price rose 9% yesterday, and 30% in the past month. If shorters are watching the futures pricing, they may be buying in early, before tomorrow, in case Fortescue’s share price goes for another run.

Still, most analysts and commentators don’t believe the current iron ore rally can be sustained, and are predicting much lower prices.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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