S&P/ASX 200 Index (ASX: XJO) materials outperformed the other 10 market sectors significantly in 2025.
The S&P/ASX 200 Materials Index (ASX: XMJ) rose by 31.71% and produced total returns, including dividends, of 36.21%.
This was mainly due to strongly rising commodity prices, which fuelled the growth of ASX 200 mining shares.
The question now is whether those ASX 200 mining shares have any room for growth left this year.
Morgan Stanley says the following 3 stocks do not. Here's why.
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Fortescue Ltd (ASX: FMG)
The Fortescue share price is down 0.4% to $22.30 on Tuesday.
Over the past six months, this ASX 200 iron ore mining share has leapt almost 30%.
It reached a 52-week high of $23.38 on 11 December.
Valuation is one reason why Morgan Stanley just downgraded Fortescue shares to an underweight rating.
An underweight rating means a stock is expected to underperform its peers. It implies that investors should reduce exposure so they hold a lower proportion of the stock to its weighting in the market.
The broker's 12-month share price target for Fortescue is $19.75.
Morgan Stanley said it expects Fortescue to report strong realised iron ore prices for 2Q FY26.
However, it's concerned that costs may rise and production from Iron Bridge may weaken.
This implies an 11% potential downside from here for Fortescue shares.
Sandfire Resources Ltd (ASX: SFR)
The Sandfire Resources share price is down 0.7% to $18.98 today.
The ASX 200's largest pure-play copper share has risen 72% over six months and 93% over 12 months.
The stock reached a record $19.61 per share last week.
A rising copper price has been powering this share price growth.
Copper is in high demand as the green energy transition continues worldwide. Copper is an essential input in electrification.
Yesterday, Morgan Stanley reiterated its sell rating on Sandfire Resources shares.
The broker raised its price target on the ASX 200 mining share from $11.45 to $16.15.
This implies a potential downside of 15% from here.
IGO Ltd (ASX: IGO)
The IGO share price is 0.8% lower at $8.84 at the time of writing.
This ASX 200 lithium mining share has ripped 112% in FY26 so far.
This lines up with the period of time in which lithium commodity prices have rebounded.
Lithium began a long-awaited recovery in July after three years of dramatic declines followed by stagnation.
Today, the lithium carbonate price is at a two-year high.
Improving global demand for batteries, EVs, and new infrastructure associated with the green energy transition is fuelling the rebound.
Yesterday, Morgan Stanley reiterated its sell rating on IGO shares.
The broker increased its 12-month price target from $4.50 to $8.40.
This implies a potential downside of 5% from here.
