Mineral Resources Ltd (ASX: MIN) shares are starting the week in a positive fashion.
In afternoon trade, the mining and mining services company's shares up 3% to $21.81.
This is despite the company losing Macquarie Group Ltd (ASX: MQG) as one of its bulls.
What's going on?
According to the note, Macquarie has been busy looking over the mining sector and adjusting its commodity price forecasts.
Unfortunately for Mineral Resources, it has cut its iron ore and lithium forecasts meaningfully. Speaking about iron ore, the broker said:
We remain cautious on iron ore relative to both consensus and spot (~US$93/t) in the short term (CY26-28), reducing our CY25 outlook by 2% to US$97/t. We see second half pricing at approximately spot levels, before falling to US$85/dmt next year.
We remain bearish relative to consensus over the medium term (CY26-28) with an underweight stance and prices of US$85/t, US$80/t and US$75/t from CY26-28 which is 6%/8%/14% below consensus.
Macquarie is even more bearish on lithium and has taken an axe to its estimates. It said:
We cut our price outlook by 19% in CY25 to US$715/t CIF China for spodumene, which is 18% below consensus, with 2H25 pricing of US$635-650/t 4-7% above spot of US$610/t. We forecast supply growth of ~26% in CY25 against a headline global demand growth of 14%. The key change to our growth outlook is the increase in African supply of ~65kt LCE (or ~4% of current demand). Demand growth has declined in the short term by ~20kt LCE, due to less ESS demand.
We cut our CY26-28 prices by 20%/28%/29% to US$733/t, US$923/t and US$1,188/t with the S/D inflection now being pushed back to 2029 (previously 2028). Our prices are 24%/20%/10% below consensus across the medium-term horizon.
Mineral Resources shares downgraded
In response to the above, Macquarie has cut its earnings estimates for Mineral Resources materially. It explains:
Incorporating lower iron ore and lithium prices drives material downgrades to earnings outlook. We have also revised our assumptions for production, costs and mining services volumes and margins. EPS are cut by 53%/41% for FY25/FY26, while earnings downgrades are larger at 84-108% for FY27-FY29e.
This has led to Macquarie downgrading Mineral Resources shares to neutral rating (from outperform) with a reduced price target of $22.00. This is largely in line with where its shares are currently trading this afternoon.
Macquarie concludes:
Target price is decreased by 37% to A$22/share on lower iron ore and lithium prices. Downgrade to Neutral. We note the large financial leverage position of MIN makes it more susceptible to price changes.
