The company’s stock has plunged nearly 38 per cent since the year began, largely due to a slump in iron ore prices, positioning it among the poorest performers in the S&P/ASX 200 index.
Iron ore prices fell below US$100 a tonne earlier this week, pushing this year’s losses to around 30 per cent. The decline is anticipated to persist amid ongoing concerns over demand versus abundant supply, especially given the continued slowdown in China’s construction industry.
Market analysts warn things can get worse for China, and in turn Fortescue, if Donald Trump is elected as the next president of the US.
In addition to Fortescue, Australian companies BHP and Rio Tinto have also experienced significant losses, with their valuations dropping by billions and share prices falling by 18 per cent and 16 per cent, respectively.
Jun Bei Liu, lead portfolio manager at Tribeca Investment Partners, noted that currently China’s slowdown is impacting companies like Fortescue more significantly than US policy.
However, she predicts that Trump’s intensified “China bashing” will further strain an already struggling economy, which can negatively impact Australia’s resource companies with a strong focus on China.
During his latest presidential campaign, Trump has announced plans to impose a 10 per cent tariff on all imports and a 60 per cent tariff specifically on Chinese goods.
“At this point, investors are saying that clearly trade conflict and China bashing is to be the key policy and especially the China part of it is almost bipartisan. It’s something that is going to potentially escalate as the election is getting heated up,” said Liu.
“Clearly with the tariff, it is going to put more pressure on the Chinese economy. The Chinese economy has already been struggling for some time, it really struggled to return to the pre-COVID level of economic activity and with their housing slump, they really do need things to go smoothly for them to recover.”
But Liu highlighted that the Democrats, too, have been touting more tariffs on Chinese companies, alongside maintaining the tariffs imposed by Trump back in 2018.
“Iron ore prices many analysts are forecasting at about US$80 for the longer term … but it has held in the US$100 mark for some time even though the Chinese economy is pretty poor,” she said.
In its July publication, the Australian government’s Resources and Energy Quarterly report projects iron ore prices to reach US$77 per tonne by 2026, whereas CBA anticipates a long-term price of US$68 per tonne.
In an investor note this week, Morningstar’s Jon Mills also warned that Fortescue’s challenges could worsen under a Trump administration.
“With steel exports from China set to face headwinds, and the company’s mines relatively high on the cost curve, Fortescue’s competitive position is relatively weak. Further, Trump’s plan to repeal the Inflation Reduction Act – which provides substantial subsidies for green hydrogen – could also impact Fortescue’s US-based green energy investments,” Mills said.
Despite her concerns, Liu remains optimistic about 2025, suggesting that China’s electrification initiative could drive demand for iron ore, potentially offsetting the gap left by the construction slowdown.
“The amount of iron ore required and copper, and things like that, for the electrification is going to be meaningfully more substantial over the medium term … so I do think we’re just in that in-between period where the traditional spend on railway and housing is not picking up yet, and renewables are yet to ramp up to the extent of that weakness, but I think heading into next year the momentum is pretty strong.”
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
