ASX mining shares were given a boost today, on news that Goldman Sachs analysts have upgraded the broker’s iron ore and copper price forecasts, and raised the target prices for some big miners.
Which shares were upgraded
Goldman Sachs has upgraded its target prices for the big three mining companies: BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG).
The broker said BHP was the best share to play the strong copper price, and lifted the miner’s earnings estimates for the 2021 and 2022 financial years by 26% and 37% respectively.
Goldman lifted its price target for BHP by 8% to $45, and rated the shares a “buy”.
The broker also raised Rio Tinto’s earnings forecasts for 2021 and 2022 by 48% and 49% respectively, lifting its share price target 11% to $108.10 a share. The broker rated Rio shares “neutral”.
Meanwhile, Fortescue Metals’ earnings for the two years were raised 35% and 71%, and its price target increased by 18% to $20.10 a share. The broker rated Fortescue shares “neutral”.
Higher iron ore and copper price forecasts
Goldman said the upgrades were underpinned by its bullish forecasts for the iron ore and copper prices.
The broker lifted its 2021 iron ore price forecast up 33% to US$120 a tonne.
Longer range forecasts for 2022 and 2023 were also raised by 27% and 11% to US$95 a tonne and US$80 a tonne respectively.
Iron ore has recently rallied to US$148 a tonne after the Brazilian producer Vale SA cut its production guidance. The Brazilian miner is having ongoing production problems after an accident at one of its mines. The company has said that it was unlikely to be back at full output before the end of 2022.
Meanwhile, Goldman also lifted its copper price forecast for 2021 by 18% to US$3.91 a pound, and by 23% to US$4.17 a pound in 2023.
Iron ore supply to China
The upgrades today have given further support for Australia’s iron ore exporters to China, who experts said would not be significantly impacted by the recent political spat with Beijing.
Experts said that China has few alternatives to replace Australian iron ore imports, with more than half of iron ore supply globally shipped from this country. At best, China could only get 56% of its current volumes if it completely cut off Australia – according to analysts. This has so far undermined Beijing’s ability to coerce Australia economically.
Share price movements today
At the time of writing, the BHP share price is up 0.77% to $42.58, and the Rio Tinto share price is almost unchanged at $115. Meanwhile, Fortescue Metal share price has lifted 0.98% to $21.67.
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More reading
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Motley Fool contributor Eddy Sunarto owns shares of BHP Billiton Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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