The Fortescue Metals Group Limited (ASX: FMG) share price is rebounding after hitting a 9-month low of $17.81 last Thursday.
At market close on Monday, shares in the iron ore major finished up 0.55% at $18.37.
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Fortescue share price defies weak iron ore outlook
Iron ore prices tanked to 1-year lows last Friday. This was following increasing concern that more steel production constraints will come out of China.
Mining.com reported that:
…the most-traded January iron ore contract on the Dalian Commodity Exchange ended daytime trading 0.3% lower at 732.50 yuan ($113.66) a tonne. It touched 717.50 yuan a tonne on Thursday, the weakest since February 4.
Prices edged lower following reports that:
In Jiangsu, China's second-largest steel-producing province, a campaign to monitor energy consumption among industrial enterprises including steelmakers raised fears of further disruption in blast furnace operations.
Prices on the spot market remained weak, falling 0.4% to US$129.71/tonne on Friday, according to Fastmarkets. Sources told Fastmarkets that prices ticked lower in expectation of weakening demand. This was due to potential further cuts in steel production until the end of 2021.
Despite the bearish headlines, the Fortescue share price has managed to rally more than 3% in the last two trading sessions.
What's next for iron ore?
The outlook for iron ore doesn't seem very promising.
Mining.com quoted analysts from Westpac Banking Corp (ASX: WBC) who said:
Iron ore prices have had a volatile couple of months but as August closed, it was clear there had been a quantum shift in the market leading us to revise down our year-end forecast from $175/tonne to $125/tonne.
To add some perspective, Fortescue's average realised price for its lower-grade iron ore was US$135/dry metric tonne (dmt) in FY21.
The last time iron ore traded at US$125/t was around mid-November last year. At this time, the Fortescue share price was fetching roughly ~$17 a share.
