Why are ASX 200 mining shares getting hammered on Friday?

A COVID-19 lockdown in China appears to be impacting ASX mining shares today.

Key points
  • The materials sector is currently the ASX 200's worst performing index, slipping 1.8%
  • Its tumble follows a disastrous night for commodity prices. Iron ore futures plunged 8% overnight while base metals fall as much as 7.6%
  • They were weighed down by a major lockdown and lower factory activity in China

The S&P/ASX 200 Materials Index (ASX: XMJ) is dragging the S&P/ASX 200 Index (ASX: XJO) into the red on Friday as many of the market's biggest mining shares struggle.

The materials sector has fallen 1.8% at the time of writing following a disastrous night for iron ore. For context, the ASX 200 is up 0.02% right now

ASX 200 mining giants BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG) are among those suffering. Their share prices are falling between 1.8% and 2.5% right now.

So, what's weighing on the sector on Friday? Let's take a look.

Upset man in hard hat puts hand over face.

Image source: Getty Images

What's going wrong for ASX 200 mining shares?

ASX 200 mining shares are sliding on Friday as a major lockdown in China weighs on sentiment for materials.

Chengdu, the capital of China's Sichuan province, is in lockdown after 157 COVID-19 infections were detected in the city, BBC News reports. That sees around 21 million people in lockdown.

Fears the lockdown could further hamper the nation's recovery seemingly weighed on iron ore futures overnight. It plummeted 8% to US$96.39 a tonne.

Meanwhile, base metals tumbled as much as 7.6% after Chinese factory activity was found to have fallen in August, according to CommSec.

To top it off, Macquarie has reportedly downgraded its outlook for the copper price and slashed earnings forecasts for copper miners as a result, The Australian reports.

The broker is also said to have dropped its price targets for Sandfire Resources Ltd (ASX: SFR), 29Metals Ltd (ASX: 29M), BHP, and Rio Tinto by between 17% and 3%.

Today's tumble comes after the ASX 200 sector housing the market's mining shares posted a whopping 4.9% loss on Thursday. It's currently 10.2% lower than its August peak.

Lithium shares are among today's worst performers. Shares in Mineral Resources Limited (ASX: MIN), Lake Resources NL (ASX: LKE), and Core Lithium Ltd (ASX: CXO) are currently the ASX 200 materials index's biggest weights, falling 5.7%, 5.3%, and 5.4% respectively.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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