The Fortescue Ltd (ASX: FMG) share price has slipped lower this year, as the chart below shows. Lower prices offered by big businesses can be an appealing buying opportunity, depending on the current market conditions.
There is a lot for investors to consider with the current economic climate, particularly when it comes to iron ore prices and China.
The US tariff situation has added more uncertainty into the mix. Iron ore prices are unpredictable at the best of times and the outlook is quite clouded, so there's a range of possible outcomes.
I'm going to share my thoughts on both the positives and negatives surrounding the business.
Positives about the Fortescue share price
A key positive about the company today is that its valuation is much more attractive than it was at the start of the year. It's down 17% in 2025 to date and it has dropped 35% in the last 12 months. While that's not ideal for existing shareholders, it does mean prospective buyers can get a much better deal today.
China is by far the most important buyer of iron ore globally, so strength or weakness in the economy can have a major impact on Fortescue.
US tariffs on Chinese goods are not beneficial for the Asian superpower, although it's positive that the current tariff rate is significantly lower than the 145% rate imposed several weeks ago.
According to reporting by various media, including CNBC, President Trump and Chinese President Xi had a long phone call last week. Following that, it was announced that US Treasury Secretary Scott Bessent and other US officials will hold trade talks this week.
Talks don't guarantee the iron ore price will be supported. However, I think dialogue between the two major superpowers helps reduce the risk of bad-case scenarios. A return to much-higher levels of tariffs would be a significant negative for the company.
While Fortescue can't control the iron ore price, it does control of how much iron ore it produces each year. In the FY25 third quarter, the business reported total iron ore shipments of 46.1mt, contributing to record shipments for the nine months to 31 March 2025.
Finally, at this lower valuation, the business offers investors a pleasing level of passive income. At the current Fortescue share price, it could pay a grossed-up dividend yield of 9% in FY25, including franking credits, according to the forecast on Commsec.
Negatives
I'm not going to try to predict what the US and China's longer-term relationship will look like, there have already been so many changes over the last six months.
However, it's quite possible that the US and China won't work together collaboratively during Trump's term. This could impact demand for Australian iron ore, and therefore profit generation and the Fortescue share price.
Considering commodity businesses are heavily influenced by supply and demand, it could be a significant negative if iron ore producers continue ramping up production without giving thought to what happens with the iron ore price.
For example, Rio Tinto Ltd (ASX: RIO) is part of a consortium involved in the huge African iron ore project called Simandou. Its low costs could allow Simandou to produce large quantities of iron ore, hurting the supply and demand balance in the future, unless Chinese demand unexpectedly picks up.
It's also a shame to see that demand for green energy has really cooled off. Fortescue's efforts to grow its green energy production may take longer to pay off, reducing the possibility of profits for that division in the shorter-term.
Final thoughts on the Fortescue share price
I think Fortescue is trading at a fairly attractive price considering the possibility of positive outcomes. But, it's possible the US and Chinese relationship could sour, so it's not the most attractive opportunity to me right now. Other ASX mining shares and ASX dividend shares could make stronger bets.
