One of the most important sectors within the S&P/ASX 200 Index (ASX: XJO) is the ASX iron ore shares. These include names like BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: RIO). Of course, the iron ore price has a major impact on the fortunes of the big names.
The iron ore price has been highly volatile over the last few years, with Chinese demand playing a key role in its rise and fall.
Aside from the last few weeks, the second half of 2022 has been a period of weakness for iron as the Chinese economy faltered with COVID lockdowns limiting activity within the Asian superpower.
However, the last few weeks have been good for the commodity.
Image source: Getty Images
What's going on with the iron ore price?
As readers may already have guessed, the recovery is seemingly down to an improving position in China.
The country has been steadily lifting its strict COVID rules, encouraging its citizens to adapt to the different COVID variants.
An analyst from the Commonwealth Bank of Australia (ASX: CBA) mining and energy team Vivek Dhar is optimistic about the outlook for steel, the Australian Financial Review reports. He forecasts Chinese policymakers will officially shift to 'living with COVID' at China's 'Two Sessions' policy meeting next year in March.
Dhar said the Commonwealth Bank is anticipating China's infrastructure sector to "drive steel demand substantially". However, at this stage, it is "unclear whether policymakers will tolerate an increase in steel output to meet stronger demand given current policy restrictions on the alloy".
Bloomberg also reported that China has hinted at more property support. It reports Chinese Vice Premier Liu as saying the real estate sector is a "pillar" of the economy and that new measures are being considered to improve the financial condition of the industry and boost confidence.
What next for the ASX iron ore shares?
The share prices of BHP, Fortescue, and Rio Tinto seem to be rallying on the expected recovery of economic activity in China.
Will they keep going higher? Certainly, it depends on how the iron ore price performs from here. So how likely is it that the iron ore price could return to US$130 or US$150 per tonne? Indeed, it may have seemed unlikely that the iron ore price would have gone above US$200 in 2021. But, it's possible that it could go back below US$100 from here too.
Time will tell what happens next.
