Key points
- ASX 200 iron ore majors struggled through 2021
- This expert believes the slump means they are now trading for bargain prices
- Additionally, with China expected to grow in 2022, they might be set to take off
There's been a lot going on with S&P/ASX 200 Index (ASX: XJO) iron ore giants in 2022. Notably, BHP Group Ltd (ASX: BHP) has unified with its London listing to become the biggest company on the ASX.
But with the 3 majors – BHP, Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG) – having ended 2021 in the red, they might not seem like the best investment in 2021.
However, Randal Jenneke, head of Australian equities at T. Rowe Price, disagrees. He believes 2022 will be China's year and the iron ore majors will be taken along for the ride.
Let's take a closer look at what the expert is predicting will be in store for ASX 200 iron ore giants this year.
Are iron ore giants 2022 in the 'buy' zone?
The 3 major iron ore stocks of the ASX 200 ended last year in the red. The Fortescue Metals share price led the fall, tumbling 18%.
Meanwhile, those of BHP and Rio Tinto slid 2% and 12% respectively.
However, Jenneke is predicting blue (green?) skies for the companies in 2022, driven by growth in China.
He said the Chinese market was one of the only global markets to fall in 2021 – slipping 21%. That leaves the nation pushing for more growth while much of the world attempts to slow down inflation.
"If you think about the story for China for 2021, it was a story about deceleration of growth, dealing with the property market issues, and high levels of leverage," said Jenneke.
"But China slowed too much. China finished 2021 with about 4% GDP growth. Their target for 2022 is 5.5% to 6%.
"So, that's really interesting because what that means is, we think the demand environment is going to improve for commodities … therefore, the big miners should be positioned to do much better."
He said the recent poor performance may have put ASX 200 iron ore stocks back into the buy zone.
"When you come back to the valuations of some of the big miners like BHP and Rio, they're quite cheap versus their history and on most valuation metrics they screen attractive," said Jenneke.
How have ASX 200 iron ore shares performed in 2022 so far?
This year has been a good one so far for ASX 200 iron ore giants.
The Fortescue Metals share price – last year's worst performer – has gained 7% year to date.
Meanwhile, the BHP share price is also in the green, perhaps unsurprisingly given its unification. It has surged 10%.
Finally, the Rio Tinto share price is leading the pack with a gain of 14%.
