The Fortescue Ltd (ASX: FMG) share price has had a torrid time in 2024, falling by more than 33%. But, ASX iron ore shares do regularly go through cycles, so it's possible the iron ore price could bounce back in 2025.
It's impossible to predict with certainty how long the iron ore price cycle will remain deflated. China is the dominant buyer of iron ore, so the Asian superpower is a major influence on what will happen next for iron ore miners and, specifically, Fortescue shares.
Let's look at the latest going on with the iron ore market for an indication of what's been happening recently.
Iron ore market
According to Trading Economics, the iron ore price climbed above US$106 per tonne in early December, supported by the belief of some that China will launch more financial stimulus measures during important political meetings this month.
Trading Economics reported that the Politburo's decision to "skip a readout of its regular November meeting has fuelled speculation that stimulus support could be on its way". This, as the world's second-largest economy "braces for the return of [incoming US president] Donald Trump".
Trump has threatened to initiate import tariffs, including a possible 100% tariff on a bloc of nine nations in the Brics alliance.
Turning to commentary on the steel market, Trading Economics said strong steel exports and destocking in China have also boosted steel margins, which is supporting higher production.
The economics website also reported that the latest Chinese data revealed that Chinese manufacturing activity expanded for the second consecutive month in November, "further strengthening the demand outlook for iron ore."
According to its global macro models and analyst expectations, the iron ore price is projected to be US$103.91 by the end of this quarter and US$97.09 in a year's time.
What could the Fortescue share price do?
It's notoriously difficult to predict with any certainty what will happen with the ASX mining share, but there are predictions out there.
The broker UBS is pessimistic about where the Fortescue share price may trade over the next year.
UBS currently has a sell rating on the ASX iron ore share, with a price target of $17.60. This implies the broker believes Fortescue shares could decline 10% within the next year.
The broker reached this conclusion after Fortescue's FY25 first quarter update, which it thought "missed expectations" due to adverse weather. Additionally, the sold price for its iron ore was "weaker than expected".
UBS had this to say about what's next and the key catalysts for the foreseeable future:
1) Iron ore: China's policy pivot remains key, with more support expected. We do not expect a large, steel intensive stimulus, and forecast US$100/95/90t for iron ore prices [in] 2025/26/27. 2) Dec-Q: Given lower production, higher strip, higher cost; the Dec-Q takes on increased significance to determine if FY25 guidance can be met. 3) Iron Bridge: realised price will be watched given weakness mid-year. 4) Energy: FIDs [final investment decisions] [are] unlikely on major projects until the appropriate policy settings are in place.
Financial forecasts
UBS has also made some projections of what financials Fortescue may achieve in the current financial years.
The broker suggested that the ASX iron ore share could generate $15.9 billion of revenue, $5.4 billion of operating profit (EBIT), $3.7 billion of net profit, earnings per share (EPS) of $1.20, and a dividend per share of 86 cents.
That projected dividend translates into a fully franked dividend yield of 4.4% and a grossed-up dividend yield of 6.3%, including franking credits, at the current Fortescue share price.
