Is it time to buy beaten-up ASX 200 mining shares?

Has a verdict even been reached?

| More on:
Two miners standing together.

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

ASX 200 mining shares were punished heavily last year. As a basket, represented by the S&P/ASX 300 Metals and Mining index (ASX: XMM), they fell by more than 10%.

This was in a world where the broader S&P/ASX 200 index (ASX: XJO) set numerous record highs.

The mining giants were all down, just to different magnitudes. BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Mineral Resources Ltd (ASX: MIN), and Fortescue Ltd (ASX: FMG) all finished in the red.

After this selloff, is now the time to pounce on the sector? Let's see what the experts think.

Created with Highcharts 11.4.3BHP Group + Rio Tinto Group + Mineral Resources + Fortescue PriceZoom1M3M6MYTD1Y5Y10YALL0www.fool.com.au

Citi remains cautious on ASX 200 mining shares

ASX 200 mining shares were heavily sold last year and are trading at far lower prices than this time 12 months ago.

Some might say now is the time to 'bottom-fish' among these beaten-up stocks.

But Citi analyst Paul McTaggart warns that valuations alone aren't a reason to buy into the sector. According to reporting by The Australian Financial Review:

Improved valuation metrics are not yet a green light for investors to dive back in. The macro backdrop remains uncertain, with persistent demand-side concerns and geopolitical risks overshadowing the improving valuation metrics.

McTaggart expects one major headwind to be the slowdown in the Chinese economy.

Citi forecasts the nation's GDP to slow to just 4.2% this year, impacting demand for many commodities, particularly iron ore. According to Statista, China is the world's largest importer of the resource.

Citi also sees "further downside to consensus" for iron ore. It isn't alone, either. As my colleague Aaron reports, the RBA projects an 80% reduction in iron ore demand from China by 2050.

For this reason, McTaggart sees "no reason to get excited yet" on the ASX mining sector.

Views are mixed ASX 200 mining shares

Citi is tip-toeing around the space with a delicate outlook on ASX 200 mining shares.

In comparison, analysts at Morgan Stanley see value in the sector. In November last year, the broker recommended switching from overpriced bank stocks to unloved mining plays.

It has positive views on energy and niche segments like uranium, according to reporting from The AFR.

But it isn't ignoring the risks out of China, either. In its 2025 outlook, the broker said it sees "weaker growth" from the nation this year,  "due to insufficient consumption stimulus and the potential for higher US tariffs".

Foolish takeout

While improved valuations might tempt some investors, Citi reckons the risks facing ASX 200 mining shares outweigh the rewards for now.

But Morgan Stanley takes the opposite view, noting now might be the right point in the cycle to consider mining plays.

Both see a weaker growth outlook from China as a risk. In that case, these brokers appear to be on two sides of the same coin. TIme will tell what eventuates from here.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Female miner smiling at a mine site.
Resources Shares

Up 60% this year, this ASX 200 mining stock just smashed production records

Production surge headlines quarterly results.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Resources Shares

After lifting its price target, Macquarie now expects 36% upside from this ASX mining stock

The precious metals producer released better-than-expected production guidance.

Read more »

A miner in a hardhat and high visibility clothing makes a thumbs up symbol.
Resources Shares

4 reasons to buy Rio Tinto shares today

A leading expert forecasts strong growth potential for Rio Tinto shares.

Read more »

Man with rocket wings which have flames coming out of them.
Resources Shares

Why Macquarie expects this ASX All Ords copper stock could surge 38%

With costs coming in below expectations, this ASX All Ords copper stock could rocket higher over the coming months.

Read more »

Iron ore price Vale dam collapse ASX shares iron ore, iron ore australia, iron ore price, commodity price,
Resources Shares

Major miners up as China announces new mega project

Can a new mega-dam absorb iron ore oversupply?

Read more »

A young man sits at his desk with a laptop and documents with a gas heater visible behind him as though he is considering the information in front of him. about the BHP share price
Broker Notes

Leading broker has just downgraded BHP shares. Is it time to sell?

Macquarie sees little upside. But why?

Read more »

A young woman wearing a blue blouse with white polkadots holds her phone up with an intrigued and happy look on her face as she reads some news.
Resources Shares

3 reasons why the BHP share price could be a buy

Here are my optimistic thoughts on BHP.

Read more »

mining asx shares represented by miner writing report on clipboard
Resources Shares

This ASX 200 miner is ramping up copper output as prices reach all-time highs

Copper production leads quarterly update.

Read more »