A sudden collapse in iron ore prices has tipped the Fortescue Metals Group Ltd (AS:X FMG) share price off a cliff.
Shares in the iron ore major have tanked 8% in the last week and are down 15% since all-time highs of $26.48 on 29 July.
Iron ore prices fall below US$200/tonne
Iron ore prices were standing tall at the end of July, with spot prices trading at around US$210/tonne according to Market Index.
However, prices would quickly deteriorate to below US$170/tonne this week.
China is headlining the weakness in iron ore prices, with its government requesting that steel mills produce no more than their 2020 volumes, according to Mining.com.
Chinese steel production in the first half lifted almost 12% compared to 2020 figures, suggesting a significant cutback is needed.
More recently, Mining.com flagged that China’s iron ore demand might continue to remain weak in the near term, ahead of its Beijing Winter Olympic Games in February 2022.
It claims, “Steel hub Tangshan will extend existing curbs to March 13 next year to ensure good air quality for the Games, researcher Mysteel reported, citing a draft document issued by the city’s environmental office.”
The article pointed to Beijing’s 2008 Olympics, where authorities shut down a number of industrial operations near the capital.
While output came to a grinding halt, the city enjoyed “blue skies for an entire month”.
This isn’t the first time
Between 26 February and 22 March, the Fortescue share price experienced a 23% drawdown under similar circumstances.
Tangshan, one of China’s most polluted cities, was ordered to limit or halt production on certain days to reduce its emissions of air pollutants.
Fortescue share price snapshot
The Fortescue share price is down 9.23% year-to-date, greatly underperforming both the S&P/ASX 200 Index (ASX: XJO) and ASX 200 Materials Index (INDEXASX: XMJ) which have rallied 13.7% and 13.08% respectively.
A catalyst on the horizon for Fortescue shareholders is its FY21 results.
The highly anticipated announcement is expected to land on 30 August.