BHP stock and more: 3 ASX commodity titans to watch in 2024

Here are the 12-month share price targets on 3 popular ASX mining stocks and the 2024 outlook for the commodities relevant to them, according to top broker Goldman Sachs.

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BHP Group Ltd (ASX: BHP) stock and two other ASX mining giants are on watch in 2024, but for differing reasons.

Let's take a look at the 12-month share price targets on three popular ASX mining stocks, and the outlook for the commodity prices relevant to each of these companies.

BHP Group Ltd (ASX: BHP)

The BHP stock price is $47, down 0.57% at the time of writing on Thursday. Goldman Sachs has a 12-month price target of $50.50 on BHP shares.

BHP mines iron ore, copper, metallurgical coal, and nickel. It's also developing a potash operation.

In a recent report, Goldman said iron ore (62% Fe) averaged US$120 per tonne (pt) in 2023, steady on 2022. The broker estimates an average price of $US110 pt in 2024 and US$95 pt in 2025.

Copper averaged US$3.85 per pound (pp) in 2023, down from US$4 pp in 2022. The broker estimates US$4.17 in 2024 and US$4.76 in 2025.

Semi-soft (SSCC) coal averaged US$195 pt in 2023, down from US$287 pt in 2022. Goldman estimates US$168 pt in 2024 and US$130 in 2025.

Nickel averaged US$9.74 pp in 2023, down from US$11.66 in 2022. Goldman estimates US$7.26 pp in 2024 and $US7.03 pp in 2025.

Potash averaged US$500 pt in 2023, up from US$359 pt in 2022. The broker anticipates an average of US$450 pt in 2024 and US$463 pt in 2025.

Goldman maintains its buy rating on BHP stock, explaining:

We are Buy rated on: (1) Attractive valuation, but at a premium to RIO; o (2) GS bullish copper and met coal; (3) Optionality with +US$20bn copper pipeline and improved production growth; (4) Robust FCF, but still below RIO. We continue to believe that BHP's major opportunity is growing copper production in Chile at Escondida and Spence, and growing copper production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets.

Rio Tinto Ltd (ASX: RIO)

The Rio Tinto share price is $131.96, down 0.72% today. Goldman has a 12-month share price target of $141.80 on Rio Tinto stock.

Rio Tinto's main commodities are iron ore, copper, aluminium and lithium.

According to Goldman's report, aluminium averaged US$1.02 pp in 2023, down from US$1.23 pp in 2022. The broker estimates an average price of US$1.13 pp in 2024 and US$1.27 pp in 2025.

Lithium carbonate averaged US$32,694 pt in 2023, down from US$63,232 in 2022. The broker anticipates an average price of US$12,847pt in 2024 and US$11,000 pt in 2025.

The broker has a buy rating on Rio Tinto shares, explaining:

We are Buy rated on: (1) compelling relative valuation vs. peers, (2) attractive FCF and Div yield (expect 75% payout for final div), (3) strong production growth in 2024-2025 of 5-6% CuEq driven by the ramp-up of the Oyu Tolgoi UG copper mine & a recovery at Escondida and Bingham, (4) potential for FCF/t improvement in the Pilbara, and (5) high margin low emission aluminium.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is $3.51, down 1.27% on Thursday. Goldman has a 12-month price target of $2.95 on this pure-play ASX lithium share. Pilbara Minerals shares haven't traded below $3 since August 2022.

The lithium market is currently oversupplied, and this continues to weigh on lithium commodity prices. The lithium carbonate price fell another 1% in January and is down about 80% over 12 months.

Demand for electric vehicles (EVs) globally is stalling, which is affecting demand for batteries and raw lithium. Goldman notes that while Chinese EV sales and battery output continue to rise, a phase-out of subsidies and supply chain normalisation have weighed on the pace of growth.

As such, the GS commodity team expect the lithium market to be in a 202kt surplus in 2024 (17% of global demand) and continue to expect prices to trade deeply into the cost curve to balance the market.

But EVs still have a big future in our decarbonising world. So, Pilbara Minerals is a stock to watch in 2024 because, at some point, it may become a fantastic buy-and-hold opportunity for the long term.

For now, Goldman has a sell rating on Pilbara Minerals stock. This is primarily due to valuation, as the broker explains:

We see near-term FCF continuing to decline on lithium prices and 1. increasing growth spend, where we see PLS spending ~A$0.85bn on P1400, taking total capex spend from FY24E to FY28E on current and P1400 expansions to ~A$3bn, ~A$0.9bn ahead of consensus which already prices further expansion.

Furthermore, we see PLS' net cash declining to ~A$1bn (though still a relatively strong position vs. some peers and defensive into a declining lithium price), where with the stock trading at a premium to peers and relatively expensive on fundamentals.

The broker adds that an anticipated doubling in production over five years with further optionality is "more than priced in".

Motley Fool contributor Bronwyn Allen has positions in BHP Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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.

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