The iron ore price edged higher again overnight to be trading at just under US$136 per tonne.
That's helping all three of the big S&P/ASX 200 Index (ASX: XJO) iron ore stocks outpace the benchmark today.
At the time of writing in early afternoon trade on Tuesday, the ASX 200 is up a healthy 0.5%.
Here's how these top mining shares are performing at this same time:
- BHP Group Ltd (ASX: BHP) shares are up 0.8%
- Rio Tinto Ltd (ASX: RIO) shares are up 1%
- Fortescue Metals Group Ltd (ASX: FMG) shares are up 1.5%
That's certainly welcome news to shareholders.
But if Citi's outlook for the iron ore price proves out, then there could be more outperformance ahead for BHP, Rio Tinto and Fortescue shares.
Iron ore price flagged to hit US$150 per tonne
As you likely recall, the iron ore price dipped below US$100 per tonne in late May last year. The industrial metal, and the ASX 200 mining stocks, came under pressure amid concerns over falling steel demand from China.
At the time, a number of analysts were forecasting that the critical steel-making metal would remain below US$100 per tonne in 2024, as China's policymakers were seen as not doing enough to spur the nation's sluggish economy and property markets.
What a difference a few months can make.
Last week the People's Bank of China (PBoC) said it will cut the reserve requirements for Chinese banks, commencing in February. China's government is also moving to shore up its steel-hungry real estate sector.
This sees Citi upgrading its forecast for copper prices – the number two revenue earner for BHP shares and the other big ASX 200 miners – along with predicting the iron ore price will reach US$150 per tonne in the three months ahead.
According to Citi analyst Wenyu Yao (quoted by The Australian Financial Review):
We see these measures as positive and can see this risk rally continuing over the coming month on the back of further details regarding urban village redevelopment and anticipated strong total social financing figures.
And in further good news for investors in Rio Tinto, BHP and Fortescue shares, the iron ore price could get some added tailwinds heading into the second quarter, according to the broker.
"As policy momentum could gather speed ahead of the National People's Congress in March, we see rising upside catalysts into the second quarter from both macro expectations and strengthening fundamental," Yao said.
