The Fortescue Metals Group Limited (ASX: FMG) share price went bananas today, rising by around 10%.
It wasn’t the only ASX 200 (ASX: XJO) mining share that did well today. Iron ore miners also saw big gains. The BHP Group Ltd (ASX: BHP) share price went up by more than 4% and the Rio Tinto Limited (ASX: RIO) share price went up by more than 3%.
This has been a crazy year. Despite the Fortescue share price getting close to $23 earlier this year, and falling to under $15 at the end of October, the ASX miner’s share price is almost flat for the year.
Why did the Fortescue share price soar today?
According to reporting by the Australian Financial Review, China is simultaneously looking to provide support for its under-pressure property sector while also easing COVID-19 restrictions.
This could be a boost for Fortescue because China is the biggest buyer of iron ore, and the Chinese real estate sector is a big user of iron ore through its usage of steel.
According to the AFR, a deadline for lenders to reduce the amount of outstanding property loans they have in their portfolio was extended by another year.
It was also reported that “developers would also have a deadline to repay outstanding bank loans and bonds expiring within the next six months to another year”, Chinese media outlet Caixin said.
The AFR reported that ANZ said while the property plan was a positive signal, it still lacked measures to boost demand.
My thoughts
The Fortescue share price has gone up a lot in a short amount of time. Since 31 October, it has risen by around 33%. That’s a huge increase for shareholders, including Andrew Forrest.
I don’t know how much more iron China will buy from Australia if the country were to abandon lockdowns, so it’s hard to say if this recent run is too optimistic. I’d prefer to buy when investors are feeling pessimistic.
However, I do believe in Fortescue’s green energy plans. If the world is going to decarbonise, it will need to find greener energy sources like green hydrogen.
