Here's why the Fortescue (ASX:FMG) share price sank 17% in March

The Fortescue Metals Group Limited (ASX:FMG) share price was out of form and sank notably lower in March. Here's what you need to know…

| More on:
Red wall with large white exclamation mark leaning against it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Fortescue Metals Group Limited (ASX: FMG) share price was uncharacteristically out of form in March.

During the month, the iron ore producer's shares fell a disappointing 17%.

This compares to a gain of 1.8% by the the S&P/ASX 200 Index (ASX: XJO).

Why did the Fortescue share price underperform in March?

There were a couple of reasons for the underperformance of the Fortescue share price last month.

The first was the company's shares trading ex-dividend on the very first day of the month for its huge interim dividend.

When a company's shares go ex-dividend, they tend to drop by the amount of the upcoming dividend. This is to reflect the fact that the rights to the dividend remain with the seller and aren't transferred to the buyer.

In the case of Fortescue, it was paying shareholders a massive $1.47 per share dividend. This is the equivalent of a 6.1% yield, which accounts for over a third of the Fortescue share price decline.

What else was weighing on the company's shares?

However, having the biggest impact on the Fortescue share price last month was the iron ore price.

The price of the base metal came under pressure in March after Chinese authorities decided to restrict the output for some steel mills in Tangshan until the end of 2021. Regulators made the move in an attempt to combat rising pollution levels.

This led to analysts at Goldman Sachs predicting that the steel making ingredient would end up in a surplus in 2022 instead of a deficit.

According to Metal Bulletin, this news led to the benchmark 62% fines iron ore price losing ~US$10 a tonne or over 6% during the month to end it at US$165.15 a tonne.

In light of this, it will come as no surprise to learn that mining giants BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) also underperformed the market materially last month as well.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Core Lithium, Deep Yellow, EML, and Wildcat shares are falling today

These ASX shares are having a tough time on Wednesday. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Select Harvests, Sayona Mining, Weebit Nano, and Woodside shares are dropping

These ASX shares are having a tough session on Tuesday.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why BHP, Core Lithium, IGO, and Smartpay shares are dropping today

These ASX shares are having a tough start to the week.

Read more »

A male investor erupts into a tantrum and holds his laptop above his head as though he is ready to smash it, as paper flies around him, as he expresses annoyance over so many new 52-week lows in the ASX 200 today
Share Fallers

Why Bubs, Select Harvests, Temple & Webster, and WiseTech shares are falling today

These ASX shares are having a tough time on Friday. But why?

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Appen, Bowen Coking Coal, Nick Scali, and Northern Star shares are falling

These ASX shares are having a disappointing session. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Brainchip, Healius, Latin Resources, and Praemium shares are sinking today

These ASX shares are having a tough time on hump day.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Brickworks, Elders, SG Fleet, and TechnologyOne shares are falling today

These ASX shares are having a tough time on Tuesday. But why?

Read more »

Rede arrow on a stock market chart going down.
Share Fallers

Why Accent, Northern Star, Syrah, and Weebit Nano shares are falling

What's going on with these shares on Monday?

Read more »