FMG - Fortescue Ltd

[sptrawler]

Respectfully disagree @Value Collector - that correlation doesn't appear to have been the case this calendar year - a closer correlation between FMG and iron ore (either TSI or TIO) appears to be the case:

Add to that the forward projections and someone is wrong.
Way too many moving parts in Australia's economy at the moment, for my liking and none are increasing our competitiveness.

MSN

New government data projects a significant downturn for mining over the next four years, which could impact ASX mining shares.

The Federal Government delivered its Mid-Year Economic and Fiscal Outlook on Wednesday.Â

According to the ABC, the Government is forecast to suffer a $8.5 billion hit to its tax take over four years from a loss of mining export revenue.

Wednesday's update to the Federal budget will reveal a $100 billion downgrade in mining exports by Treasury over the four years to 2027-28.
The blow reflects the drop in demand for iron ore and other commodities as Australia's largest trading partner, China, struggles to shore up its deteriorating economy.

China's shifting demand​

China has historically been Australia's largest export destination, particularly in natural resources.

According to ANZ, the relationship between China and Australia remains heavily reliant on iron ore, liquid natural gas and coal. These resources represent 80% of the country's exports to China.Â

However, economists anticipate this to shift in the near future.

Looking ahead, the green transition, plus China's protracted property sector woes and shrinking population will lead to even weaker steel consumption, weighing on iron ore demand.

The Reserve Bank of Australia reinforces this view. The central bank projects that China's demand for Australian iron ore will fall by 80% by 2050.

Furthermore, according to BP, the share of coal used for power generation in China is forecast to fall from 63% in 2022 to 14% in 2050

 

[Value Collector]

Respectfully disagree @Value Collector - that correlation doesn't appear to have been the case this calendar year - a closer correlation between FMG and iron ore (either TSI or TIO) appears to be the case:

View attachment 189839

I am not saying the lower dollar has an immediate affect on FMG’s share price, I am saying the lower dollar is better for the company’s profit margin.

Iron ore is traded in US Dollars, but most of FMG’s costs are in Australian dollars, as the Australian dollar weakens FMG receives more AUD for each USD it receives.

Of course none of this happens in a vacuum, the Iron Ore price is also moving around at the same time as the dollar.

But, if the AUD weakening against the USD does offset some of the drop in IRON ORE price.

 

[Value Collector]

That's very true, but whether that halts the downward trend is yet to be seen.

I don’t pay attention to trends, I pay attention to cash flows over time.