Fortescue (ASX:FMG) share price rallies 5% as iron ore climbs

Fortescue may be trading higher on Monday, but what’s the outlook for iron ore prices?

| More on:
Pilbara Minerals engineer with hard hat looks through binoculars at work site or mine as two workers look on

Image source: Getty Images

The Fortescue Metals Group Limited (ASX: FMG) share price is surging today, up 5.6% to $16.20.

After bouncing 13.7% off last week’s lows of $14.15, investors will no doubt be hoping the Fortescue share price has finally turned the corner.

Let’s take a look.

Fortescue share price rallies on higher iron ore prices

Fastmarkets reported an uptick in iron ore prices last Friday, adding US$2.66 a tonne or 2.5% to US$111.33 a tonne.

Sources told Fastmarkets that iron ore prices increased amid “more speculative buying activity for low and mid-grade iron ore fines”.

That said, iron ore prices started the month of September around US$143 a tonne. In comparison, they were fetching record highs of US$230 a tonne in May.

Despite today’s slight improvements, there’s still a long way to go for both the Fortescue share price and iron ore.

What’s the outlook for iron ore?

Analysts at the Bank of America view further declines for the key steel-making metal, forecasting a 35% drop to US$70 per tonne.

The bank analysts said that China’s policy to “force” steel production -10% during the period August-December “puts the iron ore market into surplus”.

Barring a change in this policy stance, we don’t see any reason why iron ore shouldn’t trade down to marginal cost (c. $80/t), particularly as ‘blue sky’ policies loom in early 2022 for China’s winter Olympics.

They added that $US70 a tonne was also possible as iron ore shipments rose and the price of feedstock potentially faced headwinds that could “cut well into the cost curve”.

Linked to that, our China steel team anticipates another weak year for steel production in 2022. Of course, embedded in that … is the possibility of a rebound in steel production post-Olympics, but until then iron ore prices remain under pressure.

The last time iron ore traded around US$70 a tonne was in December 2018. Back then, the Fortescue share price was fetching just $4 a share!

Should you invest $1,000 in Fortescue right now?

Before you consider Fortescue , you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fortescue wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Share Gainers

Why did the Dubber share price push 18% higher today?

Dubber shares have bounced from yearly lows.

Read more »

Two workers on site discuss the next stage of this civil engineering job, one points his hands upwards.
Share Gainers

Why did this ASX nickel share surge 23% today?

Investors keep rewarding ASX listed metals and mining companies in 2022.

Read more »

Share Gainers

Why BlueScope, Firefinch, Monash IVF, and South32 shares are pushing higher

These ASX shares are on form on Wednesday...

Read more »

Five happy miners standing next to each other.
Share Gainers

3 ASX mining shares surging more than 10% today

Metals and mining stocks continue to be rewarded in 2022

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop regarding the NRW share price
Share Gainers

Why these 2 ASX All Ordinaries shares are surging more than 20% today

Two ASX technology shares are leading the charge higher today.

Read more »

Rocket powering up and symbolising a rising share price.
Share Gainers

The Galileo Mining share price has rocketed 380% in a week. But this billionaire is still buying up big

The upside continues for the Galileo today.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP
Share Gainers

Who wants to be a millionaire? If only you’d invested $10,000 in these ASX shares 10 years ago

You won’t believe how much you would have pocketed if you had bought these shares a decade ago.

Read more »

Rising share price chart.
Share Gainers

Why BlueScope, OFX, Pilbara Minerals, and Step One shares are pushing higher

These ASX shares are pushing higher...

Read more »