Forecast for ASX 200 iron ore shares in 2023: bull vs bear

We look at what the experts are predicting for iron ore prices next year.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • ASX 200 iron ore shares have rallied over the past month as the iron ore price has surged
  • Citi believes China’s reopening and the Chinese government’s assistance to the property markets could see the iron ore price hit US$150 per tonne in 2023
  • CBA has a more bearish outlook, forecasting fairly flat steel demand and an iron ore price of US$100 per tonne

S&P/ASX 200 Index (ASX: XJO) iron ore shares have enjoyed a very strong month on the back of fast-rising iron ore prices.

On 2 November, the industrial metal was trading for US$82 per tonne. Today the iron ore price increased by another 3% to be trading for just under US$111 per tonne, offering some healthy tailwinds to the big iron ore miners.

Here's how the ASX 200 iron ore shares have performed since 10 November:

BHP Group Ltd (ASX: BHP) shares have gained 14%.

The Rio Tinto Ltd (ASX: RIO) share price is up 19%.

And Fortescue Metals Group Limited (ASX: FMG) shares have leapt 25% in a month.

Now, there are numerous company-specific factors that will determine how well these ASX 200 iron ore shares perform heading into 2023. But the price of the steel-making metal is clearly one to watch.

With that said, below we look at two divergent forecasts to bear in mind.

Bull and bear statue facing off over share prices

Image Source: Getty Images

Will ASX 200 iron ore shares enjoy higher or lower prices?

Sounding off for the bulls are analysts at Citi.

The broker believes iron ore prices will remain strong in 2023, in large part thanks to China. Citi believes China's reopening from its COVID zero policies should help the world's number two economy restart its growth engine.

The broker is also bullish on its outlook for China's embattled property sector following recent measures from the Chinese government to support the iron-ore-hungry sector.

Provided China moves forward with its reopening plans, and the government offers additional significant assistance to the nation's real estate sector, Citi said the iron ore price could hit US$150 in 2023.

That price would certainly be welcomed by ASX 200 iron ore shares.

"China is making meaningful progress towards further reopening," Citi's analysts said. "We believe iron ore prices could rally towards $US150 a tonne if China rolls out meaningful credit easing in the next three [to] six months."

But not everyone agrees with this forecast.

Sounding off for the bears is Vivek Dhar, mining and energy analyst at Commonwealth Bank of Australia (ASX: CBA).

CBA believes that some analysts have put too much positive spin on the impact China will have on iron ore prices in 2023. CBA is forecasting a peak of US$100 per tonne for the industrial metal in the third quarter of 2023.

If CBA has it right, that could put some pressure on the ASX 200 iron ore shares heading into 2023 following the recent rally.

According to Dhar (courtesy of The Australian Financial Review):

While we see upside risks to our iron ore price forecast over the next year, we think prices above US$120 a tonne are unlikely to be justified by China's steel demand impulse next year…

While steel demand from China's property sector is unlikely to decline in 2023 like it probably will in 2022, it's still difficult to see steel demand in China's property construction sector growing next year. In fact, the sector that is likely to underpin China's steel demand growth in 2023 is infrastructure.

With CBA forecasting steel demand will grow at most 2% in 2023, Dhar said, "Such a view brings into question the sustainability of the recent rally in iron ore prices."

How have the big iron ore miners been tracking over the year?

Over the past 12 months, the BHP share price has gained 17%, Fortescue shares are up 18%, and the Rio Tinto share price is up 23%.

All three of the ASX 200 iron ore shares have smashed the benchmark return, with the ASX 200 down 3% over the full year.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bernd Struben 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 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 Scott Phillips.

More on Resources Shares

Businesswoman holds hand out to shake.
Resources Shares

Is this ASX lithium stock a takeover target? Sure looks like it

This company's shares could rocket if the rumours are true.

Read more »

An engineer takes a break on a staircase and looks out over a huge open pit coal mine as the sun rises in the background.
Broker Notes

Up 49% in a year, should you buy BHP shares for their 'stability and income'?

A leading expert delivers his forecast for BHP’s fast-rising shares.

Read more »

Industrials Shares

Mader Group shares are up 700% in 5 years. Is patience about to pay off again?

Profit up. Share price flat. For long-term investors, that kind of disconnect can be exactly where opportunity hides.

Read more »

Happy woman miner with her thumb up signalling Wyloo's commitment to back IGO's takeover of Western Areas nickel
Resources Shares

3 reasons to buy BHP shares now and hold for the next decade

Strong operations, dividends, and long-term demand support its appeal.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

This ASX lithium company could more than double in value one broker says, after a "transformational" funding deal

This company will be cashed up after this new agreement goes through.

Read more »

A woman stands in a field and raises her arms to welcome a golden sunset.
Resources Shares

Newmont shares jump again as record cash flow and buyback boost sentiment

Newmont shares rise after reporting record cash flow and expanded buybacks.

Read more »

Calculator and gold bars on Australian dollars, symbolising dividends.
Resources Shares

Newmont declares quarterly dividend for ASX investors

Newmont Corporation declares a US$0.26 quarterly dividend for ASX investors, with payment to follow in June 2026.

Read more »

Lakes in the form of footsteps among the green trees, indicating steps towards a healthier planet.
Resources Shares

Fortescue invests $680m in Pilbara Green Energy Project

Fortescue commits US$680 million to expand Pilbara green energy infrastructure, aiming to meet increasing industrial and data centre demand.

Read more »