Many ASX mining shares surged in FY23 as the global energy crunch and a strong dollar helped deliver a second consecutive record year of commodity export earnings.
Let's take a look at what happened to some of the big ASX 200 mining shares and energy stocks in FY23:
- The Pilbara Minerals Ltd (ASX: PLS) share price surged by more than 110%
- The Mineral Resources Ltd (ASX: MIN) share price rose by 48%
- The Whitehaven Coal Ltd (ASX: WHC) share price went up by 43%
- The Rio Tinto Ltd (ASX: RIO) share price rose by a tad over 14%
- The Woodside Energy Group Ltd (ASX: WDS) share price rose by 13%
- The BHP Group Ltd (ASX: BHP) share price increased by just over 9%
Now that a new financial year has begun, what should we expect next?
What's going to happen next for ASX mining shares?
The federal Department of Industry, Science and Resources has just released its June quarter report.
Helpfully, it gives us some clues as to where ASX mining shares may be headed in FY24 and FY25.
The key metric we can use is forecast export earnings. This takes into account both the anticipated volume of Australian exports and the projected commodity prices in both years.
The federal government is forecasting earnings to fall "noticeably" from an estimated $460 billion in FY23 to $390 billion in FY24 and $344 billion in FY25.
Driving this decline will be a fall in commodity prices, particularly energy prices, which are forecast to retreat "back toward levels traded prior to the Russian invasion of Ukraine".
Slower world economic growth due to high interest rates will mean less demand for commodities. The COVID recovery in China, in particular, has been also slower than expected.
Improving supply also means it will be a buyers' market for some commodities, hence prices will fall.
Let's get specific…
As you can see in the chart below, the government expects export earnings to decline for most commodities.
The sharpest decline will be seen in energy export earnings — especially LNG and thermal coal. Obviously, this may impact ASX energy shares and ASX coal mining shares.
There will be a less dramatic decline in iron ore earnings, thus benefitting ASX iron ore shares.
Earnings will remain roughly the same for gold, lithium, and copper. This bodes well for ASX gold mining shares, ASX lithium shares, and ASX copper shares.
Exports of energy transition metals have doubled since FY22. The government expects exports to remain over $40 billion in FY24 and FY25.
If the US government keeps its pledge to give Australian firms access to the same incentives as US and Canadian companies, then we'll likely see a boost in investment in this mining segment over coming years.
Foolish takeaway
Although export earnings give us a general idea of which ASX mining shares may do best in FY24 and FY25, individual companies will take varying pieces of the earnings pie.
Some companies may be able to increase their market share of exports through new trade deals or mergers and acquisitions.
So, use these export earnings numbers in combination with other factors to help you determine which ASX mining shares to back in FY24 and FY25.
