Shares of Fortescue Metals Group Ltd [ASX:FMG] are up 4.77% today.
Why did Fortescue’s Share Price rise?
Iron ore prices rose 1.8% last Friday according to the price index compiled by Metals Bulletin. The price rise represents the largest increase in three weeks.
Shares were trading at $5.45 today, up from $5.24 last Friday. Rio Tinto Ltd [ASX:RIO] and BHP Billiton Ltd [ASX:BHP] are also up.
Fortescue is a worldwide iron ore producer and explorer. It is Australia’s third largest miner behind Rio Tinto and BHP Billiton. The company’s primary market is China. According to Bloomberg, in 2015 China accounted for 94% of the company’s sales.
Company shares slumped in 2015 as its net income declined by 88% due to a decrease in revenue.
As reported by The Australian Financial Review, if China’s steel market steadies, Credit Suisse predicts the iron ore price rebound should keep going into the second half of 2017.
On the other hand, analysts at Citi predict iron ore prices will drop to US$60 to the end of the year and continue to fall to US$54 by mid-2018 due to increasing oversupply in the market from Australia, Brazil and India, in addition to a slowdown in Chinese demand.
Investors need to decide who’s right in their predictions — Credit Suisse or Citi — before deciding whether FMG represents good value.
For Money Morning