ASX mining shares, particularly the big three iron ore giants Fortescue Ltd (ASX: FMG), BHP Group Ltd (ASX: BHP), and Rio Tinto Ltd (ASX: RIO), have seen a boost in recent weeks.
This is largely due to fresh stimulus measures from China in an attempt to prop up the economy and share market.
We've seen the impressive gains ASX mining shares can deliver at the right time in the cycle when commodities rally.
But is this rally sustainable or just a short-lived uptick? Let's see what the experts think.
Will Chinese stimulus continue to support ASX mining shares?
China, the world's largest consumer of iron ore, has announced several economic stimulus measures in recent weeks to reignite its slowing economy.
This includes reducing interest rates, cutting minimum down payments on second homes, and loosening bank reserve requirements.
Since their announcement, the moves provided a much-needed lift to ASX mining shares, with Fortescue, BHP, and Rio Tinto all surging double digits in the past week.
Moomoo chief market strategist Michael McCarthy said that resources could be the next trend that "could drive us to more all-time highs. Speaking to The Australian:
Nobody is getting too carried away with the outlook for resources, but they're certainly trading nearer to lows than highs, and that gives some comfort that the risk for commodities is to the upside rather than the downside.
But while this may seem like good news for Australian miners, some market analysts remain cautious.
China's economy has underperformed significantly in 2024, and while stimulus measures have helped stabilise the market, the longer-term outlook remains uncertain.
Jun Bei Liu, portfolio manager at Tribeca Investment Partners, notes that Chinese growth has been disappointing this year, leading to underperformance in the resources sector.
However, with the recent stimulus, Bei Liu believes that ASX mining shares could see further gains, especially due to iron ore demand. Per The Australian:
Seventy per cent of iron ore is consumed by China … once that picks up, the direct beneficiaries are going to be Fortescue, partly BHP and partly Rio Tinto.
How long will the rally last?
While ASX mining shares have benefited from the recent bounce, some experts warn that this may not last.
According to Goldman Sachs, the iron ore price, currently US$102.85 per tonne, could fall back to US$85 per tonne by the end of the fourth quarter.
Goldman notes that the iron ore market is still facing oversupply issues, and while additional stimulus from China could provide temporary relief, the underlying challenges remain.
The broker sees a "growing surplus" by the end of this year, potentially clamping prices for the metal, which is primarily used in steelmaking.
Moreover, analysts at the firm suggest the Chinese government's stimulus moves are "likely to yield limited impact" without further funding.
Foolish takeaway
ASX mining shares could be set for a boost if the market sees value in recent government stimulus measures out of China.
Of course, much of this hinges on the performance of various commodities themselves.
Time will tell what this means for the mining majors on the ASX.
