The Fortescue Metals Group Ltd (ASX: FMG) share price suffered over the last month. It dropped more than 8% in May 2023, compared to a 3% drop in the S&P/ASX 200 Index (ASX: XJO). A 5% underperformance in just one month is considerable, as we can see on the chart below.
The ASX mining share saw some volatility as investors took in the latest iron ore price movements.
May was quite an eventful month with investors worried about the US debt ceiling and another interest rate rise by the Reserve Bank of Australia (RBA).
Let's have a look at what might have impacted the Fortescue share price last month.
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Iron ore price weakness
The iron ore price started the month at US$105 per tonne but it dropped over the month to around US$100 per tonne.
As an ASX iron ore share, the company's monthly profitability is highly linked to changes in the commodity price.
Mining costs don't typically change much month to month, so any extra revenue largely turns into net profit after tax (NPAT). But, the opposite is true when the iron ore price falls – it largely wipes off net profit. That's why changes in the iron ore price can have such a large impact on the Fortescue share price, in either direction.
If the company isn't going to generate as much profit, then it can't pay as large dividends. This is also a drag on shareholder returns.
Anything else in May?
The ASX mining share announced last month it was redeeming US$750 million of outstanding unsecured notes which were due in May 2024. Fortescue said it was redeeming them by utilising cash on hand "further strengthening Fortescue's capital structure." It won't need to pay the interest on the notes after the notes have been redeemed.
Fortescue also gave a couple of presentations. Although it wasn't deemed market sensitive, the company pointed out that five Fortescue Future Industries (FFI) green energy projects are being targeted for a final investment decision this calendar year. Those projects are located in Australia, Brazil, Kenya, the US, and Norway.
Foolish takeaway
The company's June performance could also be influenced by the iron ore price. Certainly, the Chinese economy isn't firing on all cylinders yet, so further weakness — or a recovery — for the Asian economy could be key for which way the Fortescue share price goes in the short term.
