The ASX mining share Fortescue Ltd (ASX: FMG) has seen significant volatility in the last few years, as the chart below shows. After everything that's happened, investors should consider if the business is appealing or not.
The company's success for the foreseeable future is clearly linked to what happens with the iron ore price because the commodity is responsible for virtually all of Fortescue's net profit generation.
Let's look at some of the latest forecasts for the key commodity.
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Resilient iron ore
The iron ore price fell below US$95 per tonne at the start of July 2025, according to Trading Economics. However, it has since made a large recovery to approximately US$105 per tonne. I have been pleasantly surprised the iron ore price has risen above US$100 per tonne, considering the uncertainty about Chinese demand (amid the US tariff developments) as well as efforts by the major miners to increase production.
Broker UBS recently upgraded its 2025 and 2026 iron ore price forecasts by 4% and 7%, respectively, to US$101 per tonne and US$96 per tonne.
However, the broker also expects that the start of Simandou could pressure the iron ore price negatively by approximately US$10 per tonne towards US$90 per tonne in 2027. That would likely be negative for the Fortescue share price.
What is Simandou?
Changes in both supply and demand can significantly impact the global iron ore price because it can move the market (further) into a state of undersupply or oversupply.
One of the biggest projects in the world is scheduled to come online soon, based in the Simandou mountain range which lies in the south-east of the Republic of Guinea – there is a large deposit of high-grade iron ore there.
Rio Tinto Ltd (ASX: RIO) has a joint venture with the Government of Guinea and Chalco Iron Ore Holdings, focused on blocks 3 and 4 of Simandou (of a total of four). Rio Tinto is the majority shareholder and managing partner of Rio Tinto Simfer. Those blocks contain ore reserves estimated at around 1.5 billion tonnes, according to Rio Tinto.
Once this project starts noticeably adding to global supply, it could indirectly be a sizeable headwind for the Fortescue share price. It's possible that iron ore demand could rise to offset the increased supply, but that's challenging to forecast at this stage.
Is the Fortescue share price a buy?
With the prospect of Simandou looming, I don't think this is a great time to invest considering it has already risen approximately 15% in the last six months.
UBS currently has a neutral rating on Fortescue, with a price target of $19.40. That implies a small rise over the next 12 months.
If the iron ore price stabilises at around US$105 per tonne or goes even higher, it could be a shorter-term opportunity. However, I don't think the current valuation offers much margin of safety for a long-term investment – I'd look at other ideas first.
