The Fortescue Metals Group Ltd (ASX: FMG) share price is trading at fresh year-to-date lows on Tuesday, amid a broad-based market selloff.
At the time of writing, the Fortescue share price is trading at $14.00, the lowest its been since July 2020.
What's driving the Fortescue share price lower?
A quiet week for iron ore
Iron ore prices are expected to remain stable this week following China's National Day public holiday running between 1 to 7 October.
Fastmarkets MB reported that prices remain relatively unchanged, edging just US$1.33, or 1.1% higher, to US$117.12 a tonne on Monday due to limited trading activity and liquidity.
US markets crater amid inflation concerns
The Dow Jones Industrial Average and Nasdaq Composite both tumbled more than 300 points, or 0.94% and 2.14% respectively, last night driven by inflation-based fears as oil rallied to a seven-year high.
"Investors, in my mind, are realising or thinking through a wall of worry that includes the debt ceiling, higher oil prices and inflation, a weaker-than-expected earnings season, and a Federal Reserve that's becoming less dovish," Lindsey Bell, chief investment strategist at Ally Invest told MarketWatch.
The broad-based selling taking place on the S&P/ASX 200 Index (ASX: XJO) on Tuesday has dragged the S&P/ASX 200 Materials (INDEXASX: XMJ) 1.31% lower.
Utilities and energy were the only sectors in the green.
Weak near-term outlook for iron ore prices
The Australian government's commodity forecaster, the Office of the Chief Economist (OCE), expects iron ore prices to average around US$150 a tonne in 2021 before falling to below US$100 a tonne in 2022, according to its recent September quarterly report.
"Efforts by the Chinese government to curb China's total steel output also appear to be taking greater hold and are expected to persist for the rest of 2021," the OCE flagged.
From a supply-side perspective, the OCE said that iron ore supply is expected to improve in the second half of 2021.
"Vale's Brazilian operations are slowly returning to output levels last seen prior to the January 2019 Brumadinho tailings dam collapse," it reported.
Fortescue share price in the deep red
It feels like the Fortescue share price came down as fast as it went up, currently down 43% year-to-date and down 14% in the last 12 months.
