The Fortescue Metals Group Limited (ASX: FMG) share price is underperforming its peers today and for a good reason or three!
The Fortescue share price tumbled 4.3% to $20.34 in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) gained 0.2%.
Iron ore bending to pressure
Other iron ore producers aren't faring well either, although their declines are modest in comparison. The BHP Group Ltd (ASX: BHP) share price dipped 0.4% and the Rio Tinto Limited (ASX: RIO) share price surrendered 1.6% in value.
The drop in the iron ore price is weighing on the sector as the price of the commodity declined another 1.8% to US$168.26 a tonne.
The Fortescue share price is taking the brunt of the sell-off as it's more leveraged to the iron ore price than other big producers.
Fortescue share price worst for wear
This is in part because of it's higher cost base compared with BHP and Rio Tinto. The other reason is because Fortescue's ore quality is lower than the two majors, even though it's improved over the past few years.
The point is particularly significant because pollution controls in China is behind the latest bout of weakness in the iron ore price.
But there could be an extra reason why the Fortescue share price is under more pressure than others.
Fortescue share price dropped by Macquarie
Macquarie Group Ltd (ASX: MQG) cut Fortescue from their model portfolio to lower its exposure to iron ore.
While the broker is still bullish on the sector, it is making way for miners that supply metals used in electric vehicles (EV).
Some experts believe that the market is underestimating the demand for EVs. UBS predicted that EVs will account for 20% of the total market by 2025 and every other vehicle on our roads will be electric by 2030.
This means the supply of batter cells will need to surge by around 22 times over the next decade.
Latest ASX shares to be added to model portfolio
The big ramp-up in electric vehicles mean a very significant increase in demand for lithium and copper.
Now you can see why Macquarie added the Mineral Resources Limited (ASX: MIN) share price and Mineral Resources Limited (ASX: OZL) share price to its model portfolio.
