Fortescue (ASX: FMG) share price rises 5% as iron ore climbs

The Fortescue Metal Group Limited (ASX: FMG) The stock price is up today, up 5.6% to $ 16.20.

After rebounding 13.7% from last week’s lows of $ 14.15, investors are no doubt hoping Fortescue’s stock price has finally crossed the cap.

We will take a look.

Fortescue bounces off iron ore prices

Fastmarkets reported higher iron ore prices last Friday, adding US $ 2.66 per tonne or 2.5% to US $ 111.33 per tonne.

Sources told Fastmarkets that iron ore prices rose amid “more speculative buying activity for low and medium grade iron ore fines.”

That said, iron ore prices started September around US $ 143 per tonne. By comparison, they hit record highs of US $ 230 per tonne in May.

Despite the slight improvements today, there is still a long way to go for the Fortescue share price and iron ore.

What are the prospects for iron ore?

Analysts of the Bank of America see further declines for the key steel metal, forecasting a 35% drop to US $ 70 per tonne.

Bank analysts said China’s policy of “forcing” steel production to -10% during the August-December period “puts the iron ore market in surplus.”

Unless there is a change in this policy stance, we see no reason why iron ore should not sell at marginal cost (around $ 80 / t), especially as blue sky policies grow. are profiling in early 2022 for the China Winter Olympics.

They added that US $ 70 per tonne was also possible as iron ore shipments increased and feedstock prices potentially faced headwinds that could “well encroach on the cost curve.”

Related to this, our Chinese steel team anticipates another weak year for steel production in 2022. Of course, that includes the possibility of a rebound in steel production after the Olympics, but until then, iron ore prices remain under pressure.

The last time iron ore traded around US $ 70 per tonne was in December 2018. At the time, the Fortescue share price was only $ 4 per tonne!