Two top ASX 200 mining shares to watch in 2022: Saxo Markets

Iron ore could retest its 2021 highs later this year.

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Key points

  • These 2 ASX 200 miners have trounced the index in 2022
  • A strong outlook for iron ore could see more gains ahead
  • Saxo Bank Australian market strategist, Jess Amir on the strengthening commodity sector

The S&P/ASX 200 Index (ASX: XJO) has been struggling in the new year.

Since the opening bell on 4 January, the ASX 200 is down 5.9%.

But not every share on the index has lost ground.

The BHP Group Ltd (ASX: BHP) share price has gained 6.6% so far in 2022.

And fellow ASX 200 mining giant Rio Tinto Limited (ASX: RIO) shares have gained 8%.

While those share price gains are in the rear view now, Saxo Bank’s Australian market strategist, Jess Amir, says investors would do well to keep an eye on both companies in the year ahead.

Iron ore strength could boost ASX 200 miners

Online trading and investment specialist Saxo Bank’s Q1 2022 Quarterly Outlook for global markets was released today.

Writing in that update, Amir singled out a number of ASX 200 shares that look well positioned to outperform over the coming quarters.

With iron ore prices moving higher once more, both BHP and Rio figure prominently among those.

Noting that iron ore is trading back at US$129 per tonne, its highest level since October and up 40% since the November lows, Amir said this is “exciting for investors in BHP and Rio as it boosts their profitability”.

Pointing to positive developments in China, including China’s announcement this year of some US$471 billion in major new infrastructure projects, Amir said “iron ore could claw out of its bear market and head back to the $220 mark, where it traded in May 2021”.

And that would spell good news for ASX 200 miner BHP.

According to Amir:

The biggest catalyst for the BHP share price is a rise in the iron ore price. In 2021, BHP made 58% of its revenue from iron ore, 26% from copper, 9% from coal and 7% from petroleum. BHP’s coal and petrol revenue is being boosted by record prices, but remember that this will reduce after BHP divests oil assets this year, followed by coal in 15 months’ time.  

As for the critical demand for iron ore from China, Amir said, “BHP sees iron ore demand picking up, expecting China’s GDP to grow by up to 6% this year.”

Atop its iron ore production, BHP is also pitching in with the world’s efforts to decarbonise, “supplying copper, nickel and potash”.

The BHP share price currently stands at $45.30. Will it be able to get back to its August 2021 high of $54?

“Many think it can,” said Amir.

What about Rio Tinto?

 As for Rio Tinto, Amir says this is another stock for ASX 200 investors to watch in the year ahead:

Rio shares rocketed up 20% from $88.56 in November to $106.41. Can it get back to the $135 high it hit in July 2021? The jury doesn’t think so, as it’s been facing a backlash about potentially building a $3 billion lithium mine in Serbia. Either way, tailwinds supporting Rio’s share price growth come from the way it’s currently generating revenue.

But the market seems to have mispriced that. In 2021, 56% of revenue was from iron ore, 23% from aluminium, 11% from copper and diamonds, and 10% from energy; all commodity prices are moving up.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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