The outlook for S&P/ASX 200 Index (ASX: XJO) mining shares is under the spotlight as we enter the 2023 financial year.
Australia is "the lucky country" with large deposits of resources including iron ore, gold, copper and so on.
Thanks to the commodity-rich nature of Australia, there are plenty of ASX 200 mining shares such as BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), Newcrest Mining Ltd (ASX: NCM), Northern Star Resources Ltd (ASX: NST) and Pilbara Minerals Ltd (ASX: PLS).
Resource prices can act like a rollercoaster. The relationship between supply and demand can affect prices. The last two and a half years have been pretty volatile. Several months ago, there were strong commodity prices almost across the board, but things have dropped off in recent times.
For example, the iron ore price has fallen by approximately US$20 per tonne since the beginning of June 2022. Copper is close to a 19-month low.
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What is the outlook for ASX 200 mining shares in FY23?
A one-year period is a relatively short amount of time in the investment world. However, with how quickly resource prices change, a lot could happen in one year with resources.
With the recently declining commodity prices, some brokers have gone increasingly negative on ASX 200 mining shares.
For example, it decreased its expectations for businesses involved with iron, copper, alumina and nickel. However, it does think that thermal coal businesses and lithium could be more attractive.
UBS is neutral on BHP with a price target of $38. The broker is also neutral on Rio Tinto, with a price target of $98.
Morgan Stanley is a broker that is negative on Fortescue with an underweight rating and a price target of $14.20. It points out that the lockdowns in China haven't helped and there could be a global slowdown of growth.
The broker Macquarie is particularly bullish about the prospects for ASX lithium shares after a recent decline. Macquarie thinks that the lithium price is supportive for some of these businesses. It rates Pilbara Minerals as a buy, with a price target of $4.20. Macquarie also rates Allkem Ltd (ASX: AKE) as a buy, with a price target of $17.
Morgan Stanley has also recently cut its expectations for most resources. However, it noted that the lower share prices reflect the impact of lower commodity prices. The broker cut its expectations for gold and copper, however, it thinks Newcrest has a solid longer-term outlook, which is why the price target is $28.60.
Macquarie is quite bullish on Northern Star, with a price target of $11. That implies a potential rise of over 50%, partly due to attractive growth options.
So, even though commodity prices have fallen, brokers seem to think there are opportunities with the largely lower share prices for ASX 200 mining shares.
