The Fortescue Metals Group Ltd (ASX: FMG) share price fell in April, but could it recover in May?
Fortescue shares slid nearly 7% from $22.49 to $20.94 a share in April. On Tuesday, Fortescue shares fell 0.29% to close at $20.58 apiece.
Let's take a look at what could be ahead for the Fortescue share price.
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What is the outlook ahead?
Analysts are bearish on the Fortescue share price going forward, as my Foolish colleague James reported recently.
Fortescue is a major iron ore producer that is also diversifying to green renewables via Fortescue Future Industries.
The iron ore price is a major factor likely to weigh on Fortescue shares going forward, along with progress on the company's decarbonisation plans.
Goldman believes Fortescue shares are trading at a premium to fellow mining giants Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP). Goldman said:
[T]he stock is trading at a premium to RIO & BHP on our estimates; 1.4x NAV [net asset value] vs. BHP at c. 0.95x NAV and RIO at 0.9x NAV, c. 5.5x NTM EV/EBITDA (vs. BHP/RIO on c. 5x/3.5x), and FY24 FCF of c. 4% vs. BHP/RIO on c. 7/10%.
Uncertainties around Fortescue Future Industries (FFI) diversification and Pilbara decarbonisation and impact on dividend and balance sheet.
Bell Potter and Morgan Stanley have also recently placed sell ratings on Fortescue shares.
Looking at the iron ore price, analysts recently expressed concerns the iron ore price is "not out of the danger zone".
As my Foolish colleague Tristan reported, Morgan Stanley analysts believe there could be an oversupply of iron ore soon due to China's steel production "catching up with the reality of sluggish underlying demand".
China is the world's largest iron ore importer. The commodity is essential in producing steel. In a research report yesterday, ANZ commodity strategists Daniel Hynes and Soni Kumari predicted China's steel production growth could "weaken". They said:
China's steel production in March rose 6.9% y/y to 95.6mt, taking Q1 total output to 255mt (+4% y/y).
But this strength in production is unlikely to sustain amid lower profit margins and curbs on loss-making steel mills.
Iron ore is currently fetching US$107 a tonne, according to Trading Economics.
On a positive note, Fortescue has recently started production at the Iron Bridge Magnetite Project in Western Australia. The product is now ready for shipping and suitable for steelmaking. Fortescue chairman Andrew Forrest described the news as a "game changer".
Share price snapshot
The Fortescue share price has climbed nearly 5% in a year and has risen 0.34% in the year to date.
This ASX 200 iron ore share has a market cap of about $63.4 billion based on the latest share price.
