ASX 200 mining shares were punished heavily last year. As a basket, represented by the S&P/ASX 300 Metals and Mining index (ASX: XMM), they fell by more than 10%.
This was in a world where the broader S&P/ASX 200 index (ASX: XJO) set numerous record highs.
The mining giants were all down, just to different magnitudes. BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Mineral Resources Ltd (ASX: MIN), and Fortescue Ltd (ASX: FMG) all finished in the red.
After this selloff, is now the time to pounce on the sector? Let's see what the experts think.
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Citi remains cautious on ASX 200 mining shares
ASX 200 mining shares were heavily sold last year and are trading at far lower prices than this time 12 months ago.
Some might say now is the time to 'bottom-fish' among these beaten-up stocks.
But Citi analyst Paul McTaggart warns that valuations alone aren't a reason to buy into the sector. According to reporting by The Australian Financial Review:
Improved valuation metrics are not yet a green light for investors to dive back in. The macro backdrop remains uncertain, with persistent demand-side concerns and geopolitical risks overshadowing the improving valuation metrics.
McTaggart expects one major headwind to be the slowdown in the Chinese economy.
Citi forecasts the nation's GDP to slow to just 4.2% this year, impacting demand for many commodities, particularly iron ore. According to Statista, China is the world's largest importer of the resource.
Citi also sees "further downside to consensus" for iron ore. It isn't alone, either. As my colleague Aaron reports, the RBA projects an 80% reduction in iron ore demand from China by 2050.
For this reason, McTaggart sees "no reason to get excited yet" on the ASX mining sector.
Views are mixed ASX 200 mining shares
Citi is tip-toeing around the space with a delicate outlook on ASX 200 mining shares.
In comparison, analysts at Morgan Stanley see value in the sector. In November last year, the broker recommended switching from overpriced bank stocks to unloved mining plays.
It has positive views on energy and niche segments like uranium, according to reporting from The AFR.
But it isn't ignoring the risks out of China, either. In its 2025 outlook, the broker said it sees "weaker growth" from the nation this year, "due to insufficient consumption stimulus and the potential for higher US tariffs".
Foolish takeout
While improved valuations might tempt some investors, Citi reckons the risks facing ASX 200 mining shares outweigh the rewards for now.
But Morgan Stanley takes the opposite view, noting now might be the right point in the cycle to consider mining plays.
Both see a weaker growth outlook from China as a risk. In that case, these brokers appear to be on two sides of the same coin. TIme will tell what eventuates from here.
