Could Fortescue and BHP shares climb higher in 2020?

Fortescue Metals Group Limited (ASX: FMG) shares hit a new all-time high today. Is there still room to climb in 2020 for ASX resources?

| More on:
China price control coal miner's hard hat on pile of coal MGA Thermal ASX coal stocks

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Over the course of what has been a crazy and volatile year (to say the least), ASX iron ore miner shares have been a pillar of stability. It's a rather unusual situation for ASX resources shares like BHP Group Ltd (ASX: BHP) to find themselves in. Conventionally, companies in the ASX resources sector are renowned for their volatility and tendency to rise and fall on the back of the prices their chosen commodities command at any given point.

But in the face of the coronavirus pandemic, our biggest mining companies have, in hindsight, been some of the best shares to hold in a portfolio. Take BHP. BHP shares started the year at $38.95 and are currently trading at $37.78 (at the time of writing). That's not bad for a year when the S&P/ASX 200 Index (ASX: XJO) is still down around 10% year to date.

It's an even better story for Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG). Rio shares are 2.5% into positive territory for the year on current prices, but it's Fortescue that no one seems to have informed of the current state of the global economy. Fortescue shares are up a staggering 47% year to date. Just this morning, its shares also reached another new, all-time high of $16.10.

Why are ASX iron ore miners hitting the roof?

Much like a certain noble house in a certain formerly-popular TV show, it's the iron price that counts here. Iron ore prices have had a remarkable year so far. They did fall to around US$80 per tonne in mid-March. But a supply squeeze in the large Brazilian mining industry has resulted in the iron ore price exploding in more recent months. At the time of writing, one tonne of iron ore is asking a market price of US$109.22.

Initially, many investors feared that the supply squeeze would resolve itself and the spike in the iron ore price would be fairly temporary. But the winds are changing on this train of thought, which is why we are seeing iron miners like Fortescue reach new highs today.

According to reporting in yesterday's Australian Financial Review (AFR), analysts from United States bank and broker, JPMorgan, have increased their 2020 forecasts for iron ore by 2% to US$93 per tonne. The broker cited robust steel output from China as the primary catalyst for the upgrade. It also upgraded its 2021 forecasts to include a US$84 per tonne pricing target (up from US$80).

Is it too late to buy Fortescue or BHP shares?

I always maintain that the best time to buy ASX resources shares is when there is a low point in the commodity pricing cycle. Right now, we are at the opposite point. Therefore, I don't think there is too much upside left to capture in the current market.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a disappointing hump day session for the ASX today.

Read more »

Young man with a laptop in hand watching stocks and trends on a digital chart.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Market News

Why A2 Milk, Boss Energy, Evolution Mining, and Lifestyle Communities shares are sinking

These shares are under pressure on hump day. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Market News

Why Botanix, Dexus, Strickland, and Telix shares are charging higher today

Let's see why these shares are having a good session on hump day.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Share Market News

What does Macquarie think Origin Energy shares are worth?

Let's see what the broker is saying about this energy giant.

Read more »

A female sharemarket analyst with red hair and wearing glasses looks at her computer screen watching share price movements.
Broker Notes

Up 34% this year, can Challenger shares keep rising according to Macquarie?

The leading broker has released a new research note.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Share Fallers

Guess which ASX 200 stock is crashing 42% on big news

Big bad news is weighing heavily on this stock today.

Read more »

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

Expert's verdict on 3 ASX 200 shares (2 have doubled in value and the other has lost 29%)

Two of these stocks were the best performers of their sectors in FY25. Should you buy, hold, or sell?

Read more »