The Fortescue Metals Group Limited (ASX: FMG) share price might be bouncing off oversold territory on Friday. At the time of writing, it is up 1.24% to $20.38.
This is despite the continued decline in iron ore prices, with Fastmarkets MB citing a US$20.73 fall in benchmark prices to US$132.66/tonne on Thursday.
Fortescue share price bounces off 5-month lows
The Fortescue share price hit a 5-month low of $19.80 this morning before buyers stepped up to push the company’s shares back into positive territory.
Iron ore prices have tumbled more than 40% from their May record high of approximately US$230/tonne.
China has been the main driver behind the recent free-fall in iron ore prices, placing production mandates on its steel mills. As a result, China’s steel consumption — and subsequently iron ore demand — is expected to fall in the second half.
This could have an impact on the Fortescue share price.
Furthermore, China’s iron ore appetite could remain weak in the lead-up to its Beijing Winter Olympic Games in February, according to Mining.com.
The report says:
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.
Air pollution in Tangshan should fall by at least 40% year-on-year in the days leading up to and during the Games, which start on 4 February. The city’s steelmakers account for 8% of global output.
News from the US Federal Reserve could be another factor weighing on iron ore and the Fortescue share price.
The Fed’s July meeting minutes flagged “several participants noted that an earlier start to tapering could be accompanied by more gradual reductions in the purchase pace…”.
Back in December, the Fed announced it would purchase at least $120 billion of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals,” according to CNBC.