Mining shares on the S&P/ASX 200 Index (Index:^AXJO) are starting to find their feet again but some just got hit by a broker downgrade.
China's move to put downward pressure on commodity prices and worries about economic slowdown from the COVID-19 delta variant triggered the recent sell-off in ASX mining shares.
But these concerns have taken a backseat today with the sector outperforming the broader market.
Iron ore downgrade weighs on ASX 200 mining shares
Nonetheless, JPMorgan have lowered it iron ore price forecast after noting that China's steel output for July fell 8.4% year-on-year. The downtrend continued into August.
"After hovering around $220/t for most of Jun/Jul, iron ore has corrected to ~$130/t," said the broker.
"The significant change in sentiment, combined with lower Chinese steel output has led us to cut our 2021/22 forecasts from $181/150/t to $165/125/t (-9%/-17%)."
Earnings cuts will hurt some more than others
The lower iron ore price assumption led JPMorgan to lower its earnings forecast for ASX iron ore shares by 10% to 35%.
This means a lower valuation for the BHP Group Ltd (ASX: BHP) share price, Rio Tinto Limited (ASX: RIO) share price and Fortescue Metals Group Limited (ASX: FMG) share price.
But it's the Mineral Resources Limited (ASX: MIN) share price that has come out worst for wear. This is because Mineral Resources was the only one that JPMorgan downgraded to "neutral".
Another ASX 200 mining share to get downgraded
This isn't the only ASX 200 mining shares to get downgraded by the broker. The OZ Minerals Limited (ASX: OZL) share price was also cut to "neutral" as the copper producer's valuation is looking stretched.
The OZ Minerals share price has surged around 70% over the past year when the ASX 200 rallied a more modest 26%.
Even fellow copper miner Sandfire Resources Ltd's (ASX: SFR) share price couldn't keep up as it notched a gain of around 40%.
Best ASX 200 shares to buy
But if you are wondering which ASX 200 mining shares you should be buying in the current environment, JPMorgan has a few suggestions.
One that is rated among its top picks is the BlueScope Steel Limited (ASX: BSL) share price. The dour outlook for iron ore is good news for steel producers as their input costs are falling.
Another hot ASX mining share to buy is the South32 Ltd (ASX: S32) share price.
"Aluminium and alumina price strength, along with a bounce in met coal sees a 38% FY22 earnings upgrade for S32," explained JPMorgan.
The easy pickings in the sector may be gone, but there's value to be found despite the commodity price volatility.
