The Fortescue Ltd (ASX: FMG) share price delivered an incredible return in 2025, substantially outperforming the ASX 200 (ASX: XJO).
Fortescue shares rose by an incredible 17% during 2025, compared to just a 6.25% rise for the ASX 200.
Let’s look at what may have been the key driver of the performance for Fortescue last year.
A stronger iron ore price helps
As an ASX mining share, Fortescue’s shorter-term success is heavily impacted by what happens with the iron ore price.
It generally costs Fortescue the same amount each month to extract a tonne of iron ore out of the ground, so any improvement in the commodity price is a significant boost to profit generation. However, a reduction in the iron ore price is problematic for generating a profit.
Last year, surprisingly, the iron ore price finished 2025 at around US$107 per tonne, higher than at the start of the year when it was around US$100 per tonne. This may have positively surprised investors considering the main buyer – China – has been hit by tariffs by the US, which was expected to dampen the economy.
Aside from paying more to the government, I’d expect a lot of that additional revenue per tonne to fall to the net profit line of Fortescue’s financials in FY26, assuming the iron ore price stays this year.
The iron ore miner has also seemingly reduced its green energy ambitions following the election of President Trump, which came with a different focus in terms of energy sources compared to President Biden.
While the previously-spent money on green energy may not be generating a useful return for shareholders, the market may be pleased that spending in that area is reducing. However, the company still wants to decarbonise its own operations and do its bit for emission reductions.
Is the Fortescue share price a buy?
A higher iron ore price is certainly a positive for near-term results, but there’s no guarantee that it will stay at this level.
The new African Simandou project, which is partly owned by Rio Tinto Ltd (ASX: RIO), is on track to add significant supply to the global balance and this could negatively impact the iron ore price.
When it comes to commodity businesses, I think the right strategy would be to buy low (and sell high) when the commodity is weak. This doesn’t strike me as an opportunistic time to invest in Fortescue shares – there are other ASX dividend shares I’d rather buy.
