FMG - Fortescue Ltd

[farmerge]

FMG my No 1 pick for the yearly 2025 Comp.
Can't really get excited about FMG at the moment.
Started the year well, and has since slipped and slided a couple of dollars downhill.
Not one that I would be thinking of departing from at this stage.

 

[ShareSuccess]

Fortescue shares have tumbled as China’s property slump dents iron ore prices and green energy plans remain on the drawing board. Let’s put it Under the Spotlight.

Fortescue ($FMG) chairman Andrew Forrest recently went into apocalyptic mode and warned the Pilbara region risked becoming a ‘wasteland.’

It was a stunning statement from the Rich Lister whose $12.68b fortune is built on iron ore mined from the industry’s heartland in northern WA. He claimed China’s move towards greener steel production and the Pilbara’s falling iron ore grades spelled hard times for Australia’s largest export.

Forrest’s gloomy forecast highlights China’s influence on the industry – Fortescue included – now and in the future. The Asian giant casts a long shadow at the moment: its property slump that’s sapped steel demand and concerns about its trade war with the U.S. have pushed iron ore prices below US$100 a tonne. That’s hurt Fortescue’s bottom line and its shares: the stock is down 15% this year and has halved from its 2024 peak.

The decline has cast a spotlight on Fortescue’s lack of diversification, given its green energy ambitions remain unfulfilled. The crunch on revenues from lower iron ore prices has forced a rethink on its plans to become a leader in new energy sources like hydrogen. Despite the challenges, FMG shares are among the most traded on Stake.

GREAT WALL OF WORRY China accounts for more than 70% of global demand for iron ore. China’s steel mills have been under pressure from a protracted slump in the nation’s property market: real estate accounts for 26% of China’s steel demand. So how bad is it? Prices for steel rebar, which is used in construction, fell to an eight-year low in Shanghai last week. So it’s little surprise that iron ore now fetches US$95 a tonne, down from US$140 at the start of 2024. Beijing has unveiled policies that may stabilise the property market and provide some support for iron ore prices. Forrest’s comments point to coming headwinds. China plans to transition to greener steel making. Green steel involves the use of electric arc furnaces (which use scrap metal) or the use of higher grade ores that contain less impurities. This is a problem for Australian producers: Rio Tinto ($RIO) recently informed customers that its average iron ore grade would fall. The rub for Fortescue is that it produces lower grade ores. However, some Aussie miners are investing in new mines with high grades. But will the Pilbara become a wasteland? We riffed on the end of iron ore’s golden age last year. Rio Tinto’s iron ore boss Simon Trott said he’s heard warnings of the Pilbara’s demise before. However, there are new sources of supply emerging: the Simandou project in Guinea is expected to start production of higher grade ore later this year. BHP ($BHP) CEO Mike Henry reckons that, despite more supply, iron ore prices could be resilient given China will maintain one billion tonnes of annual steel production for several years. If he’s wrong and prices fall further… There is 180m tonnes’ worth of high cost ore supply that will come under pressure. METAL FATIGUE Fortescue’s financials reflect the weakness in iron ore prices. H1 revenue fell to US$7.63b, down from US$9.15b in H1 FY24. Underlying NPAT declined to US$1.55b from US$3.33b over the same period. But let’s be clear: Fortescue still makes good money with iron ore prices at US$95 a tonne, even when including a discount for the quality of its ore. Fortescue, and its Australian rivals, are low-cost producers. Fortescue’s C1 cost (or direct cost) of producing iron ore was just above US$19 a tonne in H1. It was US$17.53 in the March quarter. Full year guidance is for a C1 cost of US$18.50-US$19.75 a tonne. The miner continues to pay dividends, though they were more than halved year-on-year (YoY) to $0.50 a share in H1. Low costs allow the miner to keep the pedal to the metal when it comes to production. Fortescue’s iron ore shipments of 46.1m tonnes in the March quarter contributed to a record 143.2m tonnes shipped in the nine months to the end of March. The company’s full year guidance is for shipments of 190m-200m tonnes. That includes 5m-9m tonnes from its troubled Iron Bridge operation, which processes lower grade ore into a higher grade product. LOW ENERGY Forrest is an advocate for decarbonisation and a critic of fossil fuels. He once said fossil fuel CEOs’ heads should be ‘put on spikes.’ But Fortescue’s attempts to create a green energy business – focused on green hydrogen – have faltered. Donald Trump’s election forced the company to abandon some of its U.S. hydrogen plans. Capex for its energy division was slashed from US$500m to US$400m earlier this year. It recently cut 90 hydrogen jobs, but said it was committed to research and development of new green energy technologies. Fortescue plans to build a wind farm to power its mines. Unfulfilled green energy ambitions have left Fortescue without the diversification enjoyed by other miners at a time of weak iron ore prices. BHP has grown its copper earnings through the acquisition of OZ Minerals and Filo Corp, while Rio Tinto has expanded into lithium through the acquisition of Arcadium Lithium. HARD ROCK Fortescue offers pure exposure to iron ore. That’s a tough ask when prices are under pressure from China’s property slump, even though Beijing is doing its best to stabilise the housing market. Low costs ensure Fortescue will continue to make money from its Pilbara operations and ride any recovery in prices. It’s whether the miner can turn its green energy rhetoric into reality that will determine whether it’s steeled for the future. Stake.....Under the Spotlight

​

 

[dat111]

Fortescue shares have tumbled as China’s property slump dents iron ore prices and green energy plans remain on the drawing board. Let’s put it Under the Spotlight.

Fortescue ($FMG) chairman Andrew Forrest recently went into apocalyptic mode and warned the Pilbara region risked becoming a ‘wasteland.’

It was a stunning statement from the Rich Lister whose $12.68b fortune is built on iron ore mined from the industry’s heartland in northern WA. He claimed China’s move towards greener steel production and the Pilbara’s falling iron ore grades spelled hard times for Australia’s largest export.

Forrest’s gloomy forecast highlights China’s influence on the industry – Fortescue included – now and in the future. The Asian giant casts a long shadow at the moment: its property slump that’s sapped steel demand and concerns about its trade war with the U.S. have pushed iron ore prices below US$100 a tonne. That’s hurt Fortescue’s bottom line and its shares: the stock is down 15% this year and has halved from its 2024 peak.

The decline has cast a spotlight on Fortescue’s lack of diversification, given its green energy ambitions remain unfulfilled. The crunch on revenues from lower iron ore prices has forced a rethink on its plans to become a leader in new energy sources like hydrogen. Despite the challenges, FMG shares are among the most traded on Stake.

​

​ GREAT WALL OF WORRY China accounts for more than 70% of global demand for iron ore. China’s steel mills have been under pressure from a protracted slump in the nation’s property market: real estate accounts for 26% of China’s steel demand. So how bad is it? Prices for steel rebar, which is used in construction, fell to an eight-year low in Shanghai last week. So it’s little surprise that iron ore now fetches US$95 a tonne, down from US$140 at the start of 2024. Beijing has unveiled policies that may stabilise the property market and provide some support for iron ore prices. Forrest’s comments point to coming headwinds. China plans to transition to greener steel making. Green steel involves the use of electric arc furnaces (which use scrap metal) or the use of higher grade ores that contain less impurities. This is a problem for Australian producers: Rio Tinto ($RIO) recently informed customers that its average iron ore grade would fall. The rub for Fortescue is that it produces lower grade ores. However, some Aussie miners are investing in new mines with high grades. But will the Pilbara become a wasteland? We riffed on the end of iron ore’s golden age last year. Rio Tinto’s iron ore boss Simon Trott said he’s heard warnings of the Pilbara’s demise before. However, there are new sources of supply emerging: the Simandou project in Guinea is expected to start production of higher grade ore later this year. BHP ($BHP) CEO Mike Henry reckons that, despite more supply, iron ore prices could be resilient given China will maintain one billion tonnes of annual steel production for several years. If he’s wrong and prices fall further… There is 180m tonnes’ worth of high cost ore supply that will come under pressure. View attachment 201100​ METAL FATIGUE Fortescue’s financials reflect the weakness in iron ore prices. H1 revenue fell to US$7.63b, down from US$9.15b in H1 FY24. Underlying NPAT declined to US$1.55b from US$3.33b over the same period. But let’s be clear: Fortescue still makes good money with iron ore prices at US$95 a tonne, even when including a discount for the quality of its ore. Fortescue, and its Australian rivals, are low-cost producers. Fortescue’s C1 cost (or direct cost) of producing iron ore was just above US$19 a tonne in H1. It was US$17.53 in the March quarter. Full year guidance is for a C1 cost of US$18.50-US$19.75 a tonne. The miner continues to pay dividends, though they were more than halved year-on-year (YoY) to $0.50 a share in H1. Low costs allow the miner to keep the pedal to the metal when it comes to production. Fortescue’s iron ore shipments of 46.1m tonnes in the March quarter contributed to a record 143.2m tonnes shipped in the nine months to the end of March. The company’s full year guidance is for shipments of 190m-200m tonnes. That includes 5m-9m tonnes from its troubled Iron Bridge operation, which processes lower grade ore into a higher grade product. View attachment 201101​ LOW ENERGY Forrest is an advocate for decarbonisation and a critic of fossil fuels. He once said fossil fuel CEOs’ heads should be ‘put on spikes.’ But Fortescue’s attempts to create a green energy business – focused on green hydrogen – have faltered. Donald Trump’s election forced the company to abandon some of its U.S. hydrogen plans. Capex for its energy division was slashed from US$500m to US$400m earlier this year. It recently cut 90 hydrogen jobs, but said it was committed to research and development of new green energy technologies. Fortescue plans to build a wind farm to power its mines. Unfulfilled green energy ambitions have left Fortescue without the diversification enjoyed by other miners at a time of weak iron ore prices. BHP has grown its copper earnings through the acquisition of OZ Minerals and Filo Corp, while Rio Tinto has expanded into lithium through the acquisition of Arcadium Lithium. HARD ROCK Fortescue offers pure exposure to iron ore. That’s a tough ask when prices are under pressure from China’s property slump, even though Beijing is doing its best to stabilise the housing market. Low costs ensure Fortescue will continue to make money from its Pilbara operations and ride any recovery in prices. It’s whether the miner can turn its green energy rhetoric into reality that will determine whether it’s steeled for the future. Stake.....Under the Spotlight

​

​ ​

If it is all about Green Steel what is China going to do with their 1161 (more than double next highest country) Coal Fired Power Plants to prevent Carbon emissions.
What is China going to do with their 247 blast furnaces. The US has not built a new blast furnace since 1980 there are less than 10 operating in US. Australia has 2 blast furnaces. It will take a great deal of time to close the blast furnaces and build the electric arc furnaces to replace them.

 

[divs4ever]

If it is all about Green Steel what is China going to do with their 1161 (more than double next highest country) Coal Fired Power Plants to prevent Carbon emissions.
What is China going to do with their 247 blast furnaces. The US has not built a new blast furnace since 1980 there are less than 10 operating in US. Australia has 2 blast furnaces. It will take a great deal of time to close the blast furnaces and build the electric arc furnaces to replace them.

China will do whatever it likes

it has done the dirty work for most of the modern world in manufacturing , maybe they will swap to biomass ( like Europe i=s trying to do )

maybe they will be re-purposed

or China will go happily on while all the rivals price themselves out of business

 

[farmerge]

China will do whatever it likes

it has done the dirty work for most of the modern world in manufacturing , maybe they will swap to biomass ( like Europe i=s trying to do )

maybe they will be re-purposed

or China will go happily on while all the rivals price themselves out of business

The later is more than likely as it would appear there is no real worry from them about the world's atmosphere etc.

 

[qldfrog]

The later is more than likely as it would appear there is no real worry from them about the world's atmosphere etc.

Science is science, the chinese leaders know what BS CO2 created climate change story is, and the CCP does not need to create hysteria to impose power.
They got full power already.
But their staying in power require them to keep providing jobs , growth and food to the population
Whereas in the west, power for our leaders is dependent on created a stressful, crisis atmosphere where the more unemployed and starving, even war, the less likely is any leadership change.
So what's the link with FMG?
FMG tried to surf the western wave, but sadly for them is facing a customer who has no will to do the same.
It is a strategic error imho, one Gina did not do and will probably cost FMG dearly.
I do not understand why Andrew did not go into IO acquisition OS as the Australian resources are already decreasing and the economic environment is so unfavorable here
Anyway, i would not buy FMG today current price yet just added Rio and will probably add BHP ..dragged and kicking

 

[Antirnator]

I am sure Andrew will figure out how to turn dead birds into coal so he can make more windmills.

 

[Value Collector]

Science is science, the chinese leaders know what BS CO2 created climate change story is, and the CCP does not need to create hysteria to impose power.
They got full power already.
But their staying in power require them to keep providing jobs , growth and food to the population
Whereas in the west, power for our leaders is dependent on created a stressful, crisis atmosphere where the more unemployed and starving, even war, the less likely is any leadership change.
So what's the link with FMG?
FMG tried to surf the western wave, but sadly for them is facing a customer who has no will to do the same.
It is a strategic error imho, one Gina did not do and will probably cost FMG dearly.
I do not understand why Andrew did not go into IO acquisition OS as the Australian resources are already decreasing and the economic environment is so unfavorable here
Anyway, i would not buy FMG today current price yet just added Rio and will probably add BHP ..dragged and kicking

China is currently installing more renewable energy that any other country on earth, but don’t let the facts get in the way of your cynicism frog

 

[Value Collector]

If it is all about Green Steel what is China going to do with their 1161 (more than double next highest country) Coal Fired Power Plants to prevent Carbon emissions.
What is China going to do with their 247 blast furnaces. The US has not built a new blast furnace since 1980 there are less than 10 operating in US. Australia has 2 blast furnaces. It will take a great deal of time to close the blast furnaces and build the electric arc furnaces to replace them.

Electric arc furnaces are used for recycling steel, so are more suited to countries like the USA that import a lot of steel products that feed scrap to their electric arc mills Blast furnaces are used for turning Iron Ore into steel so are more suited to countries that export a lot of steel products, so have less scrap available so require Iron Ore.

 

[dat111]

Electric arc furnaces are used for recycling steel, so are more suited to countries like the USA that import a lot of steel products that feed scrap to their electric arc mills Blast furnaces are used for turning Iron Ore into steel so are more suited to countries that export a lot of steel products, so have less scrap available so require Iron Ore.

Absolutely. The US utilizes electric arc furnaces in mini-mills. The price of scrap metal goes up depending upon demand and the offset is iron purchased from other locations to feed the electric arc furnaces. If China decides they want to run electric arc furnaces, they will have to have a source of scrap metal. The price of scrap metal will skyrocket. Making steel out of iron ore without coke is very expensive. I have been to a biochar plant and have seen the numbers using hydrogen as the fuel source. It is not pretty.

 

[Value Collector]

. If China decides they want to run electric arc furnaces, they will have to have a source of scrap metal.

Yes, which is going to be very hard when a large chunk of you steel production goes into products like cars, machinery and appliances that get exported, and will be scrapped in other nations feeding their electric arc furnaces.

It’s, easier to have most of your steel mills using electric arc when your country is the importer of the cars and machinery.

Australia has a high level of recycled content in the steel we produce, because we are melting down the cars and other steel products we import to make our colour bond fences and roofs.

But China has a lot less scrap available as a percentage of what they have to make.

 

[divs4ever]

China is currently installing more renewable energy that any other country on earth, but don’t let the facts get in the way of your cynicism frog

nuclear reactors of various types as well , so look forward to a LO\\T of power generation there

 

[Bailxtrader]

Technical insights on FMG​

FMG's stock price movements offer a window into the broader iron ore market's fluctuations. Recent trends have seen FMG's stock price experiencing volatility, influenced by iron ore price dynamics and broader market factors, making it a focal point for investors seeking to gauge the sector's health.

From a technical standpoint, FMG poses an interesting dilemma for investors. In response to the August 2023 lows in iron ore prices, FMG hit its own recent low in September at $19.28. Following that, FMG mirrored the iron ore price surge, rising by 50% in under four months to reach an all-time high of $29.50 in early February 2024. However, FMG's price trajectory has since declined, recently dropping below the 200-day moving average and rebounding from the 61.8% Fibonacci retracement level, which traces the movement from September's low to February's peak. The Relative Strength Index (RSI) indicated that the stock was in oversold territory when it dipped below 30 for the first time in 10 months. It has since experienced a slight rebound from these levels. Some investors may now be weighing whether the recent price and RSI bounce offers a buy signal and if the stock will maintain its position above the 61.8% Fibonacci retracement level. Additionally, the 200-day moving average could now act as a potential support level. Another aspect to monitor is the 50-day moving average descending towards the 100-day line, a movement that could suggest further downward momentum for the stock

Iron ore is a crucial commodity globally, primarily underpinning the steel industry which is a cornerstone of the construction, transportation, and energy sectors. Australia plays a key role in this equation, providing around half of the global iron ore supply. On the other hand, China is the dominant importer purchasing about 70% of the global seaborne iron ore market. Key players in the iron ore sector include Fortescue Metals Group Ltd (FMG), BHP Group Ltd (BHP), and Rio Tinto Group (RIO). FMG focuses solely on iron ore mining, whereas RIO and BHP have diversified operations. All three are among the world's top iron ore producers.

Market dynamics and price influences​

The iron ore market is generally balanced in supply and demand, which means that any shifts in pricing factors can significantly impact the commodity's price. The price has historically been largely influenced by China's demand, propelled by its ambitious growth targets, particularly in its infrastructure and property sectors. Recent trends show a decline in iron ore prices, affected by various factors including China's economic policies and global market conditions. In May 2021, the price peaked at nearly $230 USD per tonne, influenced by two main factors: supply constraints linked to Covid and China's robust government-backed infrastructure initiatives.

At the onset of 2024, iron ore was trading at close to $145 USD per tonne but has since dipped to 7-month lows around $100 USD per tonne, registering a roughly 24% decline year-to-date. While supply-side factors influence iron ore prices, they often reflect the state of China's economy. Despite the easing of some property policies in China, investments in the sector are dropping, and consumption is sluggish. However, China is committed to intensifying its stimulus efforts to boost its decelerating economic growth. There is an anticipation that a resurgence in infrastructure demand could potentially work to counterbalance the property market's frailty.

 

[basilio]

I am sure Andrew will figure out how to turn dead birds into coal so he can make more windmills.

POTY