ASX mining shares can be an attractive space to find investments if we buy at the right times in the right areas.
Commodities are exposed to supply and demand factors, so it should come as no surprise that prices can fluctuate significantly over months or years.
No one can know for sure what the future holds, but experts from ANZ Group Holdings Ltd (ASX: ANZ) have outlined their views on the commodities that may affect resource prices and the valuations of certain ASX mining shares.
Signs of decreasing production
The ANZ analysts noted that signs of tightness were emerging in base metal markets because of an increasing number of unplanned disruptions, according to the Australian Financial Review. Supply outages were raising the risk of lower output in refined metals such as copper, zinc and aluminium.
The major bank's team noted that many copper ASX mining shares have already downgraded production estimates this year amid rising unplanned disruptions in both copper and bauxite. ANZ said in its note that alumina output has already been affected.
Another commodity being disrupted is zinc, which is experiencing decrease in production. Zinc output reportedly dropped 1.5% last year and ANZ does not see any signs of improvement on the horizon. ANZ wrote, according to the AFR:
This is being exacerbated by China's incessant increase in refining capacity, creating tightness in concentrate markets and causing treatment charges to fall sharply in recent months.
The analysts noted that the inventory of commodities remained high, so the tightness in commodity markets should be limited in the short term.
But — and here's the positive news — ANZ said there could quickly be an impact if China's recent stimulus measures delivered economic growth. The AFR reported that ANZ believes this could have a positive impact on commodities such as copper, zinc and aluminium.
ANZ said it expected Chinese demand for imports to remain strong.
Which ASX mining shares I'd look at
The ANZ team discussed several different commodities, but let's look at a few of the larger and possibly safer options.
Names like Rio Tinto Ltd (ASX: RIO), BHP Group Ltd (ASX: BHP), South32 Ltd (ASX: S32), and Sandfire Resources Ltd (ASX: SFR) provide exposure to several commodities, particularly copper.
South32 produces aluminium, alumina, bauxite and zinc. Rio Tinto is also involved in commodities like aluminium and bauxite, so they would be two of my preferred ASX mining share options to go with to take advantage of ANZ's call.
