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Date : 17/09/2021

Fortescue Metals Group Shares dropped 11% On Iron Ore Prices

Fortescue Metals Group (ASX: FMG) is the largest pure play iron ore producer in Australia. The company owns and operates the Chichester Hub and the Solomon Hub located in the Hamersley ranges of Pilbara, Western Australia.

FMG shares is one of the best dividend stocks on the ASX. As iron ore prices hit record levels earlier this year, FMG doubled their profits and recorded arguably their best operating year. Dividends increased by 111% as a result as FMG declared a $2.11 a share final dividend. This brings the total dividend on FMG shares for FY21 to $3.58 a share.

Why Is Fortescue Metals Group Share Price crashed on the ASX today?

In the past few weeks however, FMG shares have endured a 30% decline as iron ore prices have crashed from the high of over US$200 a tonne to US$113 a tonne at the time of writing this piece. Slowing demand for iron ore as China is set on curbing steel production has been the root cause for the crash in iron ore prices. FMG shares as a result have crashed during this time given how correlated FMG shares are to iron ore prices.

Today, FMG shares slumped 11.48% as fears over iron ore gripped global markets. There has been a spike in the number of short positions on iron ore stocks. Institutional investors have also downgraded their forecasts for iron ore stocks such as FMG, Rio Tinto, and BHP. This has resulted in FMG shares crashing the most since it is a pure play iron ore company.

It looks like the markets are yet to decide if iron ore prices have hit bottom or if there is pain ahead. If it’s the latter, FMG shares may have further pain in the weeks to come. FMG shares closed at $15.27 a share today – a 52 week low for the FMG share price.

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