FORTESCUE Metals Group has been placed under review by analysts as the price of iron ore hits a new low.

Morningstar’s Matthew Hope said in a client note the stock (FMG) was under review as he expected to reduce his fair value estimate of the company by around 20 per cent.

“The cost-out dynamic is not a favourable one for iron ore producer margins, as the savings in the expected weak demand environment will likely be passed on to customers,” he said.

“The lower long-term US dollar iron ore price and the impact of the translation of US dollar debt with the lower currency are the key drivers of the reduction.”

He added that he maintained the view that the Pilbara iron ore miner lacked a cost advantage.

Mr Hope said he expected the miner’s relative position on the cost curve to deteriorate as low-cost supply was added and higher-cost suppliers closed, pushing Fortescue to the status of marginally profitable supplier.

“Fortescue is a very high-risk proposition, highly leveraged to iron ore and with significant debt at the wrong point in the cycle,” he said.

“Fortescue’s future relies on the US debt markets remaining open and some supply discipline from the three iron ore majors. The company appears to be able to refinance and extend the duration of debt coming due with a major refinancing under way.”

The company recently announced it was looking to shore up its balance sheet by refinancing its debt with a $US2.5 billion senior secured note issue. The miner also plans to extend its existing $US4.9bn senior secured credit facility, putting off the due date on the majority of the debt to beyond mid-2021, further strengthening its balance sheet.

Australia’s iron ore miners have been under consistent pressure as the price of the steelmaking commodity continues to fall to historic lows.

At the end of the latest offshore session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US57.70 a tonne, down 1.4 per cent from its previous close of $US58.50 a tonne. It is the first time the commodity has traded below $US58 a tonne since the first half of 2009.

ANZ said the iron ore prices continued to slide on the back of weaker Chinese data flow and comments from Deputy Secretary-General Li Xinchuan that Chinese steel output would decline to an estimated 814 million tonnes in 2015 from 823 million last year.

Key factors in this anticipated slippage are declining housing sector activity levels and industrial overcapacity.