Even though the markets are currently close to their all-time highs, many investors are still on the lookout for bargains. One expert thinks that ASX mining shares might be the best place to start.
Yes, the S&P/ASX 200 Index (ASX: XJO) has had a rough couple of weeks. But even so, the index remains less than 1% away from its all-time high. That means that finding bargain buys is a relatively difficult task right now.
Many of the ASX's most popular blue-chip shares are indeed looking relatively expensive today. These include the big four banks, Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), which are currently at levels not seen in years (or, in CBA's case, ever).
But we are also seeing stocks like Wesfarmers Ltd (ASX: WES), Macquarie Group Ltd (ASX: MQG) and Goodman Group (ASX: GMG) at levels far higher than they were a year ago today.
In contrast, many ASX mining shares are looking unloved. For instance, BHP Group Ltd (ASX: BHP) shares are down more than 20% in 2024 to date. Rio Tinto Ltd (ASX: RIO) has gone backwards by almost 15% over the same period, while the Fortescue Ltd (ASX: FMG) share price has lost almost 40%.
But the ASX expert we're referencing today isn't recommending investors buy into iron ore miners.
Instead, it recommends that investors look to ASX mining shares in the copper and aluminium spaces.
As reported by the Australia Financial Review (AFR) this week, ASX broker and investment bank Goldman Sachs is warning investors that it doesn't see pressure on iron ore prices easing anytime soon.
Goldman anticipates that high supplies of the industrial metal, combined with weakening demand from China, will likely keep the iron ore price under US$100 a tonne for at least the next 12 months.
Here's some of what Goldman's head of commodity research, Daan Struyven, had to say:
The sharp rise in iron ore stocks reflects weak China demand and strong Brazil supply, which should grow further in 2025, along with Australia supply… Without a significant increase in demand, which is not our base case, an iron ore price of $US95 a tonne is needed to keep a lid on highly flexible Indian shipments and rebalance the market.
Struyven also points out that Donald Trump's re-election to the American presidency could result in steel tariffs, which could dampen global steel demand as well.
As such, Struyven recommends investors look to ASX mining shares with aluminium or copper exposure for value right now. Goldman sees the recent Chinese stimulus packages as far more supportive of aluminium and copper prices than iron ore.
The investment bank predicts that copper prices will average US$10,160 a tonne over 2025, a 13% rise from today's level. Goldman anticipates that China will "secure supply for the energy transition" and incentivize electric vehicle manufacturing and other green industries.
This is set to boost the price of copper and aluminium. The investment bank is pencilling in an average price of US$12,700 per tonne for aluminium, a 3% rise from its current levels.
Goldman didn't go into specifics over which ASX copper mining shares or aluminium producers it prefers.
The ASX's most prominent pure-play copper mining shares right now include Sandfire Resources Ltd (ASX: SFR) and Aeris Resources Ltd (ASX: AIS). For aluminium exposure, investors can check out Alcoa Corporation (ASX: AAI) or perhaps diversified miner South32 Ltd (ASX: S32).
Let's see how these ASX mining shares react if Goldman is on the money with its commodity price predictions here.
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