Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 15 April 2016

F.M. Geeee...

Ore rebound

The iron ore price has rebounded by 36 per per cent in 2016 so far, while the oil price has also gone on a tear.

Good news for the budget, and great news for Australia, although the bull run came to an abrupt end overnight.

Fortescue Metals Group (ASX: FMG) has enjoyed some welcome relief as a result of the resurgence, its share price ripping from a January 21 low of $1.44 to touch $3.34 yesterday.


Source: ASX

Fortescue has a huge pile of net debt - totalling around US$5.9 billion - which it is trying to shave down, so will be hoping that the iron ore price really can be sustained, particularly with new market entrants adding to competition.

FMG is a highly leveraged play in more than one sense, and as such is acutely exposed to the iron ore price. It makes for a volatile ride.

The company has a market cap of just under $10 billion, and probably a bit lower this morning.

Scuttman reported over at Business Insider this week that China had imported - get this - an absolutely jaw-dropping 969 million tonnes of iron ore in the year to March 2016.

A record, obviously.