The Fortescue Metals Group Limited (ASX: FMG) share price plunged 11.48% on Friday to a 15-month low of $15.27.
Iron ore prices were far from supportive, continuing to free fall back to pre-COVID levels. Spot prices finished the week below US$100 a tonne for the first time since July 2020.
According to the Financial Times, the last time iron ore suffered a sell-off of this magnitude was during the Global Financial Crisis in 2008.
What's driving iron ore prices lower?
China has been cracking down on emissions intensive industries such as steel and aluminium.
The government and its policymakers have played a far more active role in curtailing steel output – and it looks like it's working.
S&P Global reported that China's August crude steel output tumbled 13% year-on-year and fell 4.1% month-on-month to 80.24 million metric tonnes.
The sudden focus on energy consumption and emissions targets has rattled the iron ore market and is dragging the Fortescue share price along with it.
Is there any hope for the Fortescue share price?
Fortescue's rapid descent to 15-month lows might tempt some investors to buy shares in the now heavily discounted, blue-chip miner.
According to the Australian Financial Review (AFR), Ausbil's global resources fund "recently shifted its exposure from a short position in iron ore to now being long".
The fund owns both Fortescue and Rio Tinto Limited (ASX: RIO) shares.
The fund's co-portfolio manager, James Stewart said that "what we've seen is a buyer's strike which has allowed iron ore to enter freefall."
"Steel production is falling but so is end-product steel inventory, meaning China can't keep drawing down inventory without increasing output, so that rebuilding of production has to occur at some point," he added.
The fund believes that iron ore prices are oversold and a "rebound will occur before the end of this year."
