Why are Fortescue Metals (ASX:FMG) shares down 14% in a month?

The iron ore giant has faced its share of headwinds on the charts lately.

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The Fortescue Metals Group Limited (ASX: FMG) share price has stepped into the red in morning trade.

Fortescue shares are now exchanging hands at $22.04 apiece, a 1.17% dip from the market open.

Today’s loss extends the iron ore giant’s run into the red, where its shares have given away around 14% over the last month alone.

Here we cover the headwinds in front of the Fortescue Metals share price of late.

Iron ore causing a sore

Recent downturns in the spot price of oil have been reflected on the charts in Fortescue’s share price.

To illustrate, after oil slipped below approximately $30/tonne to reach US$170/tonne last week, Fortescue shares fell from $22.76 to $22.30 after the bell last Friday.

In addition, China is scaling back iron ore production growth on the back of a 12% surge in first-half growth of Chinese steel production.

Moreover, it may be that Chinese demand for iron ore may remain weak into the coming periods, ahead of Beijing’s hosting of the February 2022 Winter Olympic Games.

For example, China is seeking to improve air quality for the games, in line with tactics employed for the 2008 Beijing Olympics, a report from Mining.com claims.

Broker notes come into play too

A note to investors from Morgans last week shows the broker’s concerns over the Fortescue shares outlook.

Morgans advised that Fortescue is “battling” a challenging execution/cost mix at its Iron Bridge magnetite project. Further, it believes the mining giant faces “slipping C1 cost performance” and some market concern on the company’s “grassroots” pivot towards renewables.

As a result, it reduced its rating and price target to $19.30 on Fortescue shares, implying a downside potential of approximately 14%.

In contrast, investment bank JP Morgan reinstated its $30 per share price target and overweight rating on Fortescue shares earlier in the month.

JP Morgan stated its FY22 earnings estimates “sit 16% above consensus” and says that iron ore markets will “remain buoyant on a multi-year view”.

Consequently, the broker feels Fortescue shares “can re-rate to reflect the company’s outstanding free cash flow generation”.

Nonetheless, investors continue the selling pressure on the Fortescue Metals share price, which has dipped a further 3.5% into the red over the last week.

Fortescue Metals share price snapshot

The Fortescue Metals share price has faced headwinds this year to date, posting a loss of nearly 6% since 1 January.

Despite this, Fortescue shares have climbed 22% into the green over the past year, just in behind the S&P/ASX 200 Index (ASX: XJO) return of around 25% in this time.

Fortescue also pays a dividend of $2.94 per share, giving a current dividend yield of 11%.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.

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