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Fortescue Metals Group shares drop 6.6% as trade tensions intensify

As US-China trade tensions come into focus again, Fortescue Metals Group saw its share price fall steeply during Friday's trading session.

Fortescue Metals Group share price Source: Bloomberg

Global equities were sold off heavily overnight and today following news that Donald Trump would hit China with an additional $300 billion of tariffs.

American markets fell almost immediately in response to the news. This morning the ASX 200 joined in on the losses, shedding 20 points by the close.

Fortescue Metals Group Ltd – which has already had a difficult month – was one of the hardest hit by this selloff, falling as much as 6.6%.

This comes after Rio Tinto Limited (ASX: RIO), another blue-chip iron ore miner, saw its shares dip today, after announcing good but not amazing half-year results.

What did trump say, exactly?

On Thursday, US President Donald Trump tweeted that additional tariffs of 10% will be placed ‘on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%.’

Investors were clearly spooked by Trump’s tweets, selling off equities across the globe as global growth concerns again come into focus.

Though not all bad news, apparently, as Australian gold miners saw a bump in their share prices today, likely due to their perceived nature as a 'safe haven' investment.

Fortescue's share price in focus

Following Trump’s tweets, Fortescue Metals Group Ltd (ASX: FMG) led the losses on the ASX today, with its share price dropping as much as 6.6%.

Even with these losses tallied up, Fortescue has had a stellar year. Since January, shares in the iron ore miner have risen 96%.

These gains have come off the back of soaring iron ore prices – which have risen some 44% since February.

Though impressive, investor enthusiasm for the stock may be beginning to wane. Fortescue shares have fallen some 13% since the company released its June Production Report.

On the face of it, this was a rosy report – one that clearly illustrated the positive impact rising iron ore prices were having on Fortescue’s top-line.

For example, 'average revenue received increased by 30 per cent to US$92 per dry metric tonne (dmt) compared to the March quarter of US$71/dmt.'

The iron ore giant also reported record quarterly shipments of 46.6 million tonnes. All up, this brought the company’s total 2019 shipments to 167 million tonnes.

Yet as concerns over ‘peak iron ore’ spiral, investors are likely concerned to what degree Fortescue’s operations will suffer if the prices of iron ore sees a more pronounced fall.

Iron ore prices moving forward

Centrally, as IG market analyst Kyle Rodda pointed out, in a piece analysing the iron ore outlook:

‘Signs are emerging that the market could be hitting its top. Chinese stockpiles have swelled as demand for the mineral cools, while Vale has announced its re-starting some of its forestalled mines, pointing to a slow return to normal market conditions.’

If the recent price action of iron ore miners like Rio Tinto Limited and Fortescue Metals Group Ltd are anything to go by, investors may indeed be leaning towards the interpretation that iron ore has peaked.

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