The Fortescue Ltd (ASX: FMG) share price has had a fascinating last six months, surging by 21%. 2024 could be the biggest year for the ASX resources share for multiple reasons.
Today, I'm going to look at how things might unfold.
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Iron ore price volatility
The Fortescue share price has benefited from the strength of the iron ore price over the last few months, rising to US$140 per tonne. It's currently sitting at around US$130 per tonne.
There are many positives and negatives facing the iron price in relation to China. The Chinese government has added a number of stimulus measures to try to boost its economy.
But, the economy is still not firing on all cylinders. According to Trading Economics, new home prices in China "sank at the sharpest pace since 2015, stretching the declining momentum to the sixth month and underscoring the slump in property demand in the country".
Trading Economics added:
… uncertainty over demand for construction materials in the year ahead tempered iron ore demand from steel mills and countered added buying activity in their usual restocking season.
Market players noted that robust portside iron ore inventories limited new purchasing demand from steel mills as the sector struggles with decreasing margins, contributing to the downturn."
The profit Fortescue generates from iron ore funds its green energy division and pays for the company's generous dividends. So its fortunes with this resource in 2024 will influence the company and the Fortescue share price.
In addition, the new high-grade project Iron Bridge is ramping up in 2024, so it will need to start justifying the money spent on it this year.
Green energy decisions
Fortescue has already committed hundreds of millions of dollars to its green energy ambitions, and 2024 might be a pivotal year. It's starting to make final investment decisions on projects it wants to work on in the US.
This is important – is it now making some tangible progress on diversifying its future operations? Or are hundreds of millions of dollars going up in smoke?
The decision to focus efforts on the US may also be misguided if Donald Trump wins the US election in 2024. He has committed to cut spending on clean energy projects and perhaps withdraw from the Paris agreement.
Financing will also be a key factor this year. Fortescue has flagged the option of bringing external investors into its green energy projects. How successful it is with this endeavour in 2024 (and subsequent years) may well dictate whether the company is able to achieve its lofty goals of delivering all green energy projects or not.
Fortescue share price snapshot
In the past year, the Fortescue share price has surged by around 20%.
