Why have Fortescue shares lost 36% since May?

Fortescue Ltd (ASX: FMG) shares are up largely flat in Tuesday afternoon trade, at $14.59 each.

Today's slump means the shares have now fallen 36% since reaching an annual high of $22.99 in mid-May. It's been a long and pretty consistent tumble, too.

Fortescue shares are now down 34% for the year-to-date.

It made me wonder, what's going on with the ASX iron ore miner's share price? And what can we expect next?

What headwinds are pushing Fortescue shares lower over the past five months?

The ASX mining shares have been smashed by a falling iron ore price this year.

Fortescue is a pure-play iron ore producer with the vast majority of its revenue coming from iron ore mining and shipping out of the Pilbara region. This means it's tightly tied to fluctuations in the metal's price.

Iron ore has dropped below CNY 670 per ton this week, which is the lowest level since October 2022, and significantly lower than the CNY 815 per ton level seen in May this year. 

According to Trading Economics, prices continue to be depressed by weaker profitability among Chinese steel mills and lower demand prospects.

It said:

"Industry data showed that the blast furnace operating rate at 247 Chinese steel mills stood at 80% last week, down 4.3% from the same period a year earlier. Supply conditions also remain ample, supported by elevated iron ore arrivals at Chinese ports and increasing global shipments."

Has the miner's latest quarterly earnings update helped rally more confidence?

It looks like it. There has been a 3% rebound in the share price since the miner posted its update for the first quarter of FY27 on Thursday last week.

The miner confirmed it shipped 46.8 million tonnes of iron ore in the September quarter, including 2.5 million tonnes from its Iron Bridge site. It also said it ended the period with US$3.2 billion in cash and net debt of US$2.8 billion after payment of its FY26 final dividend and capital expenditure.

Product inventory increased in the quarter, with sales volumes below shipments due to the ongoing CMRG talks, and further product inventory build is expected in October.

But going forward, FY27 shipments, C1 unit cost and capital expenditure are unchanged. Although Fortescue said this is still subject to the outcome from negotiations with China Mineral Resources Group (CMRG). Fortescue hopes for a resolution by the end of the calendar year, else it could affect operations.

Are the shares a buy, sell, or hold now?

The experts are pretty mixed. 

Market Index data shows most brokers now have a sell rating on Fortescue shares. However, the $16.10 average target price implies around a 10% upside, at the time of writing.

On TradingView, sentiment is more neutral. Half of analysts (8 out of 16) have a hold stance on Fortescue shares. Another six rate the shares as a sell/strong sell, and two rate them as a strong buy.

The average $15.63 target price implies a 7% upside. But the difference between the maximum and minimum is huge. Some think the shares could climb another 50% to $21.93 over the next 12 months, at the time of writing. Others think they could sink another 15% to $12.46.

The post Why have Fortescue shares lost 36% since May? appeared first on The Motley Fool Australia.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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