South32 shares whipsawed in FY24. Here's the FY25 outlook

The mining stock whipsawed in a wide range in FY24.

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South32 Ltd (ASX: S32) shares had a cyclical year in FY24.

The stock began the year trading at $3.76 apiece before consolidating to its yearly low of $2.89 by February.

Then, as commodity prices began to lift again, so too did South32 shares, reclaiming all of the prior losses from earlier in the year.

They now trade at $3.71 apiece just after market open on Tuesday, after finishing FY24 at $3.66.

Given the volatility in commodities – which has seen significant price fluctuations impact the metals and mining sector in the past 12 months – here's a look at what's in store for South32 in FY25.

South32 shares whipsaw in FY24

Investors saw their South32 shares trade in a range of 87 cents across the last financial year.

As February rolled around, investors started buying South32 en masse. This can largely be attributed to favourable market conditions for its primary commodities.

For instance, in the past year, South32 has benefitted from increased demand for materials like aluminium and manganese, which are crucial for green technologies and electric vehicles.

The aluminium price is up from US$2,170 per tonne in February to US$2,528 per tonne currently.

This is the highest aluminium price range since 2018, except for 2021-2022, when prices briefly rocketed to US$3,838 per tonne as economies reopened from COVID-19.

In its quarterly update from April, South32 reported reasonably strong output from its aluminium and manganese operations.

Aluminium production was up 1% year over year, underscored by record production at its Hillside Aluminium project. Meanwhile, the company's manganese production in South Africa achieved an 8% growth production, equating to a record production run for the quarter.

These results, combined with stronger pricing for the underlying metals, saw South32 shares rally from April to their 6-month highs of $3.96 apiece on 4 June.

What's in store for South32 in FY25?

Analysts have reacted positively to South32's recent developments. UBS, for instance, upgraded the miner to a buy, adjusting its price target to $4.15, which represents a 12% upside potential from the current price.

The upgrade comes as UBS forecasts a rise in South32's earnings by 13% to 34% over the next three years, driven by higher expected prices for manganese and alumina.

Goldman Sachs rates South32 shares a buy, projecting $4.00 per share for the miner in the coming 12 months. The company forecasts up to US$550 million in free cash flow from South32 in its full-year results.

Macquarie is also on this list of brokers positive on the stock with its $4.25 per share valuation.

According to CommSec, South32 shares are rated a buy from 9 of the 15 brokers covering the stock. The remainder say it's a hold.

Foolish takeaway

South32 shares whipsawed in a wide range throughout FY24. This is typical for an ASX mining stock, given the sensitivity of sales and earnings to the prices of commodities it mines and produces.

Brokers nonetheless remain bullish on the company for FY25. Time will tell if their estimates are right. As always, consider current market conditions and perform your own due diligence.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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