Why I'm keeping a close watch on the Fortescue share price

The Fortescue share price has plummeted in the past year.

I've been keeping an eye on the Fortescue Ltd (ASX: FMG) share price for a while now.

And the more it sinks, the closer it gets to my buy zone.

The Fortescue share price has dropped around 8% over the past week as global markets have plummeted.

For Fortescue shareholders, the latest downturn simply adds to ongoing declines.

Back in January 2024, the iron ore producer's share price was edging close to $30.

It's now down about 50% from last year's highs.

As such, in its latest half-year results, Fortescue posted profits after tax of about $2.3 billion.

That represents a decline of more than 50% on the prior corresponding period.

It's also worth noting those declines came as Fortescue achieved its highest-ever half-year shipments.

Two men in hard hats and high visibility jackets look together at a laptop screen at a mine site.

Image source: Getty Images

What happened?

A steep drop in the price of iron ore has not helped Fortescue's bottom line.

Early last year, iron ore was trading above $140 per tonne.

Since then, it's lost more than 25% of its value.

And the most recent Resources and Energy Quarterly suggests the outlook for Australia's iron ore miners is far from rosy.

The report forecasts Australia's resource and energy exports to drop to $387 billion in FY25 from $415 billion in the previous financial year.

On a more positive note, the price of iron ore is up from last year's lows of $91 per tonne, currently trading at around $104 per tonne. 

World steel production is also projected to rise to about 2 billion tonnes by the end of 2030.

That projection is partially based on forecasts of increased demand coming from the likes of India, Southeast Asia, and the Middle East.

And, by all accounts, Fortescue is still on track to achieve iron ore shipments of between 190 and 200 million tonnes.

All this means that Fortescue sits high up on my watch list.

I still have a few concerns about the company and its outlook, though.

And the price of iron ore is not one of them.

The company's cash and equivalents dropped by 30% from the previous half to around $3.4 billion.

But Fortescue did manage to reduce its debt slightly, by 1%, to $5.4 billion during the previous half.  

While a few other issues I see with Fortescue niggle at me, those concerns are not the main reasons stopping me from buying Fortescue shares.

Kid in a candy store

See, with markets copping a battering, I'm spoilt for choice.

There are other companies I've been keeping an eye on.

And right now, although Fortescue is high up on my watchlist, it is not looking like my best option.

Motley Fool contributor Steve Holland 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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