The Fortescue Metals Group Limited (ASX: FMG) share price failed to power ahead in 2021.
In the 12-month period, the mining outfit's shares moved considerably lower, down 18%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has gained roughly 13.5% over the same period.
At Friday's closing bell, Fortescue shares finished 3.14% higher to $20.37 apiece. A sharp recovery from when its shares were trading around the $14 mark in early November.
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What happened with the Fortescue share price?
The volatility in the Fortescue share price in 2021 was largely driven by a slowdown in Chinese demand for iron ore. It was no secret that the Asian superpower applied political pressure to its steel producers in curbing reliance on Australian iron ore.
Chinese lawmakers introduced new rules, limiting the importation of iron ore in 2021 to no more than 2020 levels. This led to supply issues as China threatened to impose harsh penalties for steel mills who exceed production limits.
As a result, the price of iron ore more than halved during the course of last year. From reaching its lofty highs of US$200 in May, the steelmaking ingredient's price shrunk to around the US$100 mark in the following months.
Fast-forward to today, the current iron ore price has rebounded to US$125 per tonne, an ascent of 25% since December. This is partly the reason why Fortescue shares have rallied to August 2021 prices.
In addition, the company's subsidiary, Fortescue Future Industries will team up with energy behemoth, AGL Energy Limited (ASX: AGL).
Both companies entered into a Memorandum of Understanding (MOU) to develop a hydrogen hub for the Hunter Valley coal plants. Namely, this relates to the Liddell and Bayswater coal-fired power stations, which AGL plans to transform the site.
The Liddell coal-fired power station is scheduled to close down in 2023, with Bayswater going offline in 2025.
Fortescue boss, Andrew "Twiggy" Forrest will be involved with the development, which will consist of a 12-month feasibility study. This news which arrived early last month excited investors, sending Fortescue shares 13% higher in the following two weeks.
Is this a buying opportunity?
Last month, a couple of brokers rated the company's shares with varying price points.
Australian leading investment firm, Morgans raised its 12-month price target by 30% to $16.90 for Fortescue shares. Based on the current share price, this implies a downside of around 17% for investors.
However, JPMorgan analysts had a different tone, downgrading its outlook on the company's share price to "neutral" from "overweight". The broker also slashed its rating by 9.1% to $20 apiece. Currently, it appears that investors and JPMorgan are on the same page on where they believe Fortescue should be valued.
