The ASX mining share sector is in an interesting phase of the global economic cycle. Commodity prices saw a strong period during COVID-19, but now a number of resources are suffering from weaker prices. What could happen in 2024?
There are a number of miners on the ASX including BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Fortescue Metals Group Ltd (ASX: FMG), Mineral Resources Ltd (ASX: MIN), Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), IGO Ltd (ASX: IGO) and Sandfire Resources Ltd (ASX: SFR).
In this article, I'm going to look at a few predictions for iron, lithium and copper as they represent a lot of the mining sector's market capitalisation on the ASX.
But, keep in mind that commodity prices are difficult to forecast, can be volatile and can significantly affect investor sentiment. So, it's very difficult to say where ASX mining share prices or even profit is going to be in the next year. With that in mind, let's look at the latest outlook thoughts from some analysts.
The iron ore price has outperformed plenty of earlier expectations. Instead of going below US$100 per tonne, it has risen above US$130 per tonne.
Profit is the key earnings generator for BHP, Rio Tinto and Fortescue.
With the iron ore price recently going above US$130 per tonne, things are looking positive for the ASX iron ore shares. According to Trading Economics, the iron ore price went above US$136 per tonne as expectations of "robust demand coincided with risks to supply".
Trading Economics says that purchasing activity in China remained "underpinned by the bullish backdrop" in its steel-heavy infrastructure.
Being recently said that it would accelerate its issue of bonds to target infrastructure and manufacturing projects. Infrastructure spending in China is "expected to offset the debt crisis for the residential construction sector."
This could be very positive for the ASX mining shares involved.
There is expected to be a significant increase in long-term demand for lithium as the number of electric vehicles grows in the coming years which could increase the amount of lithium batteries in the world significantly.
In the shorter term, slower demand growth and more supply have pushed down the lithium price.
The broker UBS suggests that a "significant supply response to ongoing demand and prior high prices is underway but given the robust long-term demand, we need almost all of the supply we can identify and it requires higher long-term prices."
UBS said markets appear heavily focused on short-term price weakness on a Chinese destocking cycle.
UBS said its expectation for the long-term benchmark SC6.0 (lithium) spodumene price is US$1,400 per tonne. To me, this doesn't spell a hugely successful rebound for ASX lithium share.
But, the broker did note that "even conservative demand projections will require new supply."
We'll have to see how this affects the ASX mining shares involved in 2024.
UBS recently said that it's "hard to find too many positive data points" for copper, which is when the copper spot price was around US$3.60 per pound.
The broker is positive on the "medium-long-term" as "supply side challenges seem never far away."
UBS has a long-term copper forecast of US$4 per pound, which could be a bit more positive for ASX copper shares.