Fortescue (ASX:FMG) share price at year-to-date lows, analysts slash iron ore forecasts

Analysts think iron ore prices will continue to weaken over the next 12 to 24 months.

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The Fortescue Metals Group Limited (ASX: FMG) share price is lingering around year-to-date lows. At around $17.90, Fortescue shares are being wounded by continued weakness in iron ore prices.

The latest iron ore update from Fastmarkets flagged “depressed demand in certain regions of China, where steelmakers are facing energy-consumption and emissions-control measures.”

Iron ore prices continued to post declines on Tuesday, down another 1.75% to US$121.67/t.

The Fortescue Metals share price finished today down 1.44% at $17.82 apiece.

Analysts expect more declines

Analysts from JPMorgan and Westpac both expect iron ore prices to fizzle towards the US$100/t mark, according to the Australian Financial Review (AFR). So, what could this mean for Fortescue shares?

Westpac’s senior economist, Justin Smirk, flagged that China’s iron ore demand may weaken leading into its Beijing Winter Olympic Games.

We’ve been here before with China trying to ensure blue skies leading into the 2008 Beijing Summer Olympics where we saw iron ore prices pull back quite a lot.

We are going to get more bouts of volatility heading into the blue skies period which will result in more mill closures in the fourth quarter this year.

Westpac lowered its year-end iron ore price forecast from US$175/t to US$125/t. It downgraded its year-end 2022 forecast from US$110/t to US$100/t.

JP Morgan was also concerned about China’s weak demand. That’s after its “steel production turned negative” in the second half of 2021.

“Following the typical June peak, it is normal to see a seasonal downturn into July and August. However, the drop appears to be related to general economic weakness, exacerbated by tightening pollutions controls, and relatively low steel mill profitability,” said Lyndon Fagan, a research analyst at JPMorgan.

The broker lowered its 2021 iron ore price forecast from US$181/t to US$165/t. It cut its 2022 projections from US$150/t to US$125/t.

Fortescue share price snapshot

The Fortescue share price is down 24% year to date and up just 0.68% in the last 12 months.

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