ASX 200 mining companies, such as BHP Group Ltd (ASX: BHP), are popular investments among retail investors.
In a 1 October research note, Commodities Update: Balancing act, Macquarie Group Ltd (ASX: MQG) revealed its outlook for iron ore.
The broker revealed that it was equal weight on iron ore in the short term, noting:
We retain our cautious outlook on iron ore relative to spot (~US$102/t), even despite our upwards price revisions. We see second half pricing at approximately spot levels, before falling to US$90/dmt next year. We note this is broadly in line with consensus.
However, over the medium and longer term, Macquarie is less positive, assigning an underweight rating.
Macquarie said:
Over the medium term (CY27-29), we have an underweight stance with prices of US$84/ t, US$80/t and US$78/t in CY27-29E, which is 4%/8%/12% below VA consensus.
We are unchanged from our long-term price outlook of US$78/t CFR China real (1 Jan 2025 $) on a 61% Fe basis (which is US$80/t on a 62% basis). Our 2030E price is 10% below consensus, which has been flat since our last forecast.
The broker also provided its earnings outlook and revised targets for four ASX 200 companies.
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BHP Group Ltd (ASX: BHP)
Macquarie is projecting BHP to increase earnings per share (EPS) by 3%, 7%, and 4% between FY27 and FY29.
The broker expects earnings growth to be primarily driven by higher prices for iron ore, copper, and thermal coal, and partially offset by lower met coal prices and higher assumed fines price discounts.
Accordingly, Macquarie has maintained a neutral rating on BHP shares, while cutting its price target by 2% to $42.
Rio Tinto Ltd (ASX: RIO)
In its research note, Macquarie flagged that it now prefers Rio Tinto over BHP shares.
The broker has raised its price target on Rio Tinto shares by 5% to $115, while maintaining a neutral recommendation.
South23 Ltd (ASX: S32)
As for South32, Macquarie is projecting a 27% increase in FY26 EPS, driven by higher copper, aluminium, and other base metals prices. However, in FY27, the broker expects EPS to be 7% lower.
Macquarie lifted its price target on South32 shares by 4% to $2.80 and maintained a neutral rating.
Fortescue Ltd (ASX: FMG)
Finally, as for Fortescue, Macquarie now projects:
EPS are raised 13-35% for FY26-FY29E on higher iron ore prices. Earnings changes are less than 1% for FY30E.
Macquarie has increased its price target on Fortescue shares by 6% to $16.50; however, it maintains an underperform rating.
