Why did the Fortescue (ASX:FMG) share price have such a lousy FY22 first quarter?

It's been a tough few months for the iron ore producer's shareholders

The Fortescue Metals Group Limited (ASX: FMG) share price had a disappointing run in the first quarter of FY22. 

Since the beginning of July to the end of September, the iron ore producer's shares tumbled about 36% in value. This makes the company by far one of the worst performers on the S&P/ASX 200 Index (ASX: XJO).

Fortescue's closing price on 30 June was $23.34. By the close on September 30, this had fallen to $14.96. That's a drop of 35.9% over the quarter.

At Tuesday's market close, Fortescue shares finished down 1.4% on the day to $14.79.

Miner looks into the distance as he checks a folder.

Image source: Getty Images

What's happened to Fortescue?

There are a number of factors that have caused Fortescue shares to fall in recent times.

First and foremost, the price of iron ore collapsed after reaching a record high of US$219 a tonne in mid-July. However, the price has rebounded this week, which could help the Fortescue share price going forward.

Chinese efforts to reduce reliance on Australian iron ore, along with the potential default of Chinese property behemoth Evergrande Property Services Group Ltd (HKG: 6666), have impacted the market. This has led to supply concerns as policymakers from China have imposed harsh penalties for steel mills that exceed production limits.

Furthermore, Fortescue could suffer more than its peers as it produces a lower grade of iron ore. Steel producers prefer higher quality iron ore, which miners Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) supply. Consequently, this puts a squeeze on Fortescue's margins.

Fortescue share price snapshot

Over the past 12 months, Fortescue shares have declined around 11% in value. However, when looking year to date, its losses are magnified to a sizeable 40% for the period.

Fortescue commands a market capitalisation of $45.5 billion and has more than 3 billion shares on its registry.

Motley Fool contributor Aaron Teboneras 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.

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