The Fortescue Metals Group Limited (ASX: FMG) share price is under pressure on Friday morning.
At the time of writing, the iron ore producer’s shares are down over 3% to $22.52.
Why is the Fortescue share price under pressure?
The weakness in the Fortescue share price on Friday appears to have been driven by another sharp pullback in iron ore prices.
According to CommSec, the spot iron ore price tumbled US$13.10 a tonne or 7.2% to US$170.05 a tonne.
This heavy decline has been driven by concerns that Chinese regulators will increase production limits on steel producers amid weakening downstream demand.
As you might expect, it isn’t just the Fortescue share price that is under pressure on the news. A number of other ASX miners with exposure to the steel making ingredient are also tumbling lower today.
Here’s a summary:
- The BHP Group Ltd (ASX: BHP) share price is down 2.5% to $51.81.
- The Champion Iron Ltd (ASX: CIA) share price is down 3% to $6.71.
- The Mount Gibson Iron Limited (ASX: MGX) share price has tumbled 3% to 76.5 cents.
- The Rio Tinto Limited (ASX: RIO) share price has fallen over 2% to $129.15.
This has led to the S&P/ASX 200 Resources index thoroughly underperforming the market today with a 1.7% decline.
Is this a buying opportunity?
Analysts at Macquarie currently have an outperform rating and $27.00 price target on the Fortescue share price. This implies potential upside of 20% over the next 12 months before its generous dividends.
And while this recommendation was made prior to recent weakness in the iron ore price, it is worth noting that prices are still in line with Macquarie’s expectations.
For example, in June Macquarie was forecasting the iron ore price to finish the calendar year at US$158 a tonne. Whereas in calendar year 2022 it expects an average price of US$120 a tonne, before reducing to an average if US$95 a tonne in 2023.
As a result, its analysts may see the recent weakness in the Fortescue share price as a buying opportunity for investors.