The Fortescue Metals Group Limited (ASX: FMG) share price is wobbling today. After hitting an intraday high of $20.42 shortly after open, it dropped as low as $20.20 around noon but has since bounced back to $20.38. That's a gain of 0.25% on yesterday's closing price.
We take a look at what could be affecting shares in the iron ore producer.
Iron ore prices slide to 7-month low this week
The Fortescue share price fell 3.19% on Wednesday, broadly coinciding with the continued weakness in iron ore prices.
Spot prices plunged on Wednesday, falling $10.24/t to US$143.43/t, according to Fastmarkets MB.
Prices continued to fall "amid more expectations for crude steel production curbs for the remainder of 2021", said Fastmarkets.
'Cloudy outlook' for China
China's demand for iron ore is expected to drop off in the second half of the year as the country aims to flatline its steel output.
In an article featured on Mining.com, UBS analysts said: "We expect China's steel curtailments to be targeted in 4Q when demand slows seasonally and air pollution is in focus (especially ahead of the Winter Olympics in Feb 22) and as a result we expect prices to stabilise in Sept/Oct before continuing to fall back below $100/tonne in 2022."
If UBS analysts are correct about iron ore prices falling below US$100/t next year, the Fortescue share price could be in for a bumpy ride.
Additionally, China's factory activity fell into contraction in August for the first time since April 2020.
COVID-19 containment measures, supply bottlenecks and higher raw material prices were to blame, according to Reuters.
"The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery and the impact of strict coronavirus curbs in the country, backing expectations Beijing will roll out more support measures to revitalise growth."
Fortescue share price in deep red
The Fortescue share price is well into negative territory year-to-date, down about 18%.
Investors might want to watch out for its shares going ex-dividend next Monday, 6 September.
