The Fortescue Metals Group Limited (ASX: FMG) share price has been on a continuing decline since late July.
Shares in the world's fourth-largest iron ore miner have come under pressure amid the plunging spot price for the steel-making ingredient.
At Friday's market close, Fortescue shares ended the day at $18.27. This means that its shares are now down 13% for this month alone.
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More on the iron ore spot price
After touching a record high of US$219.77 per tonne in July, the iron ore spot price fell off a cliff. Chinese policymakers laid down the rules for its steel producers in an effort to curb reliance on Australian iron ore.
Chinese mills were instructed to limit 2021 output to no more than 2020 levels, or face harsh consequences.
As such, the current iron ore price has dropped to US$133.82, a descent of almost 7% in September. But how will this affect the Fortescue share price?
What does this mean for Fortescue?
The sharp decrease will no doubt have an impact on Fortescue's bottom line; however, profits are still expected to be churned out.
In its full-year results released last month, Fortescue reported its highest-ever annual shipments of 182.2 million tonne of iron ore. Coupled with its industry-leading C1 costs of US$13.93 per wet metric tonne, this still translates to bumper profits.
The company is forecasting to maintain iron ore shipments for FY22, with a guidance of 180 million to 185 million tonne.
C1 costs are expected to rise slightly to US$15-US$15.50 per wet metric tonne (based on assumed average exchange rate of AUD:USD 0.75).
Only time will tell if Fortescue can achieve the above guidance, despite its strong dependence on the Chinese market. If it does miss the mark however, its shares could tumble further.
Fortescue share price summary
It has been a rollercoaster ride for Fortescue investors, with its shares reaching all-time highs before sinking to near 52-week lows.
Over the last 12 months, the company's share price has moved just 2% higher, with year-to-date down more than 20%.
Fortescue has a market capitalisation of around $56.2 billion and approximately 3 billion shares on its books.
