Can the Fortescue share price have a better month in June?

We check what might be ahead for the ASX 200 mining giant this month.

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Key points

  • Fortescue shares slid 8% in the month of May
  • Looking to June, the price of iron ore may impact the Fortescue share price
  • However, hydrogen demand is surging, which could be a positive for Fortescue 

The Fortescue Metals Group Ltd (ASX: FMG) share price slipped into the red during May, but can it recover in June?

Fortescue shares shed more than 8% from $20.94 at market close on 28 April to $19.22 at market close on 31 May. For perspective, the S&P/ASX 200 Index (ASX: XJO) dropped nearly 3% over the month.

Let's check the outlook for the Fortescue share price.

What's impacting Fortescue?

Fortescue shares may have fallen last month, but they were not the only ASX 200 mining shares to slide in May. BHP Group Ltd (ASX: BHP) shares lost 5.4% over the month, while the Rio Tinto Ltd (ASX: RIO) share price fell 4.7%.

A drop in the iron ore price appeared to impact the big ASX 200 iron ore shares, including Fortescue, during the month.

Iron ore fell nearly 5% from US$105 a tonne to finish at $US100 on May 31, Trading Economics data shows.

What about June?

Analysts at ANZ recently predicted iron ore prices to slide to US$95 a tonne amid concerns over steel demand from China.

Commenting on the iron ore price, commodity strategists Daniel Hynes and Soni Kumari said:

Muted steel demand from China's property markets during the peak construction season is a key headwind for iron ore and coking coal demand.

Narrowing profit margins could see loss-making steel plants curtail operations, which would slow steel production growth in Q2 2023.

Commenting on The Bull recently, Sequoia Wealth Management's Peter Day also placed a sell recommendation on Fortescue shares. However, he is expecting strong production and cost performance for the rest of 2023. He said:

The iron ore division has tailwinds with strong production and cost performance expected over the remainder of fiscal year 2023. Also, the Iron Bridge Magnetite project is ramping up. However, recent iron ore price weakness has driven downside risk to our forecasts in a spot price scenario. The scope of projects remains a headwind to shareholder returns, in our opinion.

Iron ore sentiment can change daily, however, and news emerged on the weekend that China is considering a new "property support package", Bloomberg reported. This may impact steel demand — and the iron ore price — if it goes ahead.

However, it's not just iron ore that impacts Fortescue. The company is also working on a significant green push including hydrogen via Fortescue Future Industries (FFI).

China Petroleum Pipeline Engineering Corporation (CPPEC) vice president Li Guohui highlighted huge demand for hydrogen at the China World Hydrogen Technology Convention last week, Upstream reported.

He told the convention China expects hydrogen demand to lift to 100 million tonnes per year by 2060, the publication reported.

"Surging demand" for hydrogen was a topic of discussion at a recent Australian Financial Review ESG Summit in Sydney.

Fortescue is also among the top ten dividend payers on the ASX 200, as my Foolish colleague Bronwyn reported recently.

Share price snapshot

The Fortescue share price has fallen nearly 5% in the last 12 months.

This ASX 200 mining share has a market capitalisation of about $62.9 billion based on the latest share price.

Motley Fool contributor Monica O'Shea 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 Scott Phillips.

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