S&P/ASX 200 Index (ASX: XJO) mining shares have widely outperformed the benchmark over the past six months.
The reason, as you're likely aware, is soaring commodity prices.
That's helped propel the S&P/ASX 300 Metals & Mining Index (ASX: XMM) – which includes some smaller miners outside the ASX 200 – to a 31.82% gain over the past six months.
Over those same six months, the S&P/ASX 200 Index (ASX: XJO) gained 2.95%.
So, how did the big ASX 200 mining shares fare?
Miners make hay as iron ore rebounds
With iron ore rebounding from US$93 per tonne in early November to US$158 per tonne today, the Fortescue Metals Group Ltd (ASX: FMG) share price has gained 37.2% over six months.
Meanwhile, Rio Tinto Ltd (ASX: RIO) shares are up 19.8%, and BHP Group Ltd (ASX: BHP) has gained 39.5%. All since 1 October.
While the ASX 200 mining shares have revenue sources outside of iron ore (some more than others), the price of the industrial metal they dig from the ground does have a major impact on their share prices.
Which brings us to…
Are these ASX 200 mining shares in trouble?
Andreas Lundberg is the joint portfolio manager of The Montgomery Fund.
He's concerned about the unravelling of China's property development sector. This could usher in some serious headwinds for ASX 200 mining shares.
"[Property] sales in China are down close to 50% year-on-year in January and February. This does not bode well for demand for iron ore," Lundberg points out. "And that's bad news for our iron ore miners, as property construction accounts for about 42% of Chinese steel demand."
Addressing the worsening financial woes of China Evergrande Group (HKG: 3333), Lundberg says, "Things are going from bad to worse for China's second-largest property developer.".
He continues:
Evergrande Group requested a trading halt and subsequently said they will not be able to produce an annual report before the deadline of 31 March as their auditors have imposed a lot of 'additional audit procedures' due to the deteriorating trading situation.
In his eyes, that means "auditors are not at all comfortable signing off the accounts as a going concern".
And the troubles aren't limited to China's number two property developer.
"Evergrande's woes are not an isolated case," he says. "Signs of distress are starting to emerge at other Chinese developers too."
According to Lundberg:
We are seeing more signs of distress in the Chinese property development sector. For example, last week Sunac China Holdings Ltd (HKG: 1918) proposed a delay in their upcoming Rmb 4.0 billion maturing bond repayment indicating they are also suffering cash flow issues.
So, are these ASX 200 mining shares in trouble?
"All in all, there is bad news for the Chinese property sector and by extension the seaborn iron ore market," he says.
ASX 200 mining shares open strongly
For the time being, it's looking like another positive day for ASX 200 mining shares. At the time of writing, the S&P/ASX 300 Metals & Mining Index is up 2.69%.
