Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

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S&P/ASX 200 Index (ASX: XJO) iron ore shares have taken a beating in 2024.

Although that trend took a sharp turn for the better this week.

Shares in the big iron ore miners like BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG) have come under pressure amid a sharp retrace in the price of the steel-making metal.

Iron ore kicked off 2024 trading at around US$145 per tonne.

Last Friday, that same tonne was trading for just under US$100.

But an uptick in optimism over the outlook for China's steel-making output on the back of economic data released over the weekend has helped drive the iron ore price higher this week. The industrial metal gained another 3.2% overnight to trade for US$109.15 per tonne.

As you'd expect, that's also helped lift the ASX iron ore shares.

Here's how the big three have performed so far this week:

  • BHP shares are up 3.9%
  • Fortescue shares are up 6.2%
  • Rio Tinto shares are up 3.9%

This sees the S&P/ASX 300 Metals & Mining Index (ASX: XMM) up 3.4% so far this week, compared to the 1.3% gain posted by the ASX 200.

Still, ASX iron ore shares have some way to go before making up for their 2024 losses.

Year to date:

  • BHP shares remain down 12.4%
  • Fortescue shares remain down 14.8%
  • Rio Tinto shares remain down 10.8%

Here's why the worst of the selling could be over.

ASX iron ore shares eyeing Chinese demand

According to Australia and New Zealand Banking Group Ltd (ASX: ANZ) analysts Daniel Hynes and Soni Kumari (courtesy of The Australian Financial Review), markets have already priced in slumping steel demand from China's weak property sector.

And steel demand from the world's number two economy, and by connection ASX iron ore shares, looks like it will be supported by strong growth in other areas.

According to ANZ's analysts:

Iron ore prices may be near a floor amid a reset in expectations around demand. Weak consumption from the property sector is being countered by robust demand from other sectors.

ANZ doesn't forecast any miraculous rebound for China's struggling property sector this year. The analysts said they don't see a "near-term solution", adding that "steel demand from its residential real estate is likely to fall further this year".

But infrastructure investments, particularly in renewables, are likely to see increased steel demand, alongside a flagged boost in social housing investment.

ANZ also expects China's car manufacturers, alongside the nation's shipping and machinery sectors, to boost iron ore demand this year.

"Together, these areas of growth should lift China's steel consumption by 0.5% in 2024," the analysts said.

As for what prices the ASX 200 iron ore shares can expect for their core product for the remainder of 2024, the analysts said:

With a large portion of Chinese domestic supply produced at costs higher than US$100/tonne, we see the current price as a floor. Ultimately, we expect iron ore to trade in a US$90–110/t range for the remainder of the year.

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.

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