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Fortescue Metals Group Limited shares slide to a 52-week low on a new iron ore price downgrade

Shares in Fortescue Metals Group Limited (ASX: FMG) hit a 52-week low at $4.47 today, following the announcement that the company lowered its ‘iron ore price realisation guidance’ for FY2018.

Fortescue measures its realised iron ore price in comparison to a benchmark, the Platts 62 CFR index. In February, the company announced that in the first half of FY2018 the discount on the benchmark had widened compared to the previous corresponding period, driving the realised iron ore price down to 68% of the index, compared to 86% in the first half of FY2017.

At the time, Fortescue blamed seasonal production restrictions imposed by Chinese regulators and demand for higher grade ores from Chinese steel mills, but gave a price realisation forecast of between 70% and 75% of the Platts 62 index for the full year.

Today, the company lowered that guidance to 65%, meaning that the price discount on its product is expected to grow even wider in the six months to June 31. Fortescue attributes this trend to continuing production restrictions in China and concerns over a possible trade war.

At the time of writing, the stock is down 1% to $4.56.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. 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 Scott Phillips.

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