Too early to buy ASX metal miners: Citi
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The news: A persistently weak macro backdrop is limiting near-term recovery in the Australian metal mining sector, according to Citi analysts, who say it is too early for investors to return to market heavyweights BHP, Rio Tinto and Fortescue.
The numbers: The analysts noted that 2024 was a "challenging year" for ASX metals, with BHP (-20%), Rio (-13%) and Fortescue (-36%) seeing significant declines.
Global manufacturing purchasing managers' indices (PMIs) remain below 50, signalling continued contraction in the industry.
Meanwhile, China's GDP growth is forecast to slow to 4.2% in 2025 amid ongoing challenges in property markets, they said, likely keeping metals demand subdued for much of the calendar year.
The context: The analysts said that while some may view a weaker Australian dollar as a tailwind for miners, historically a weaker Australian dollar to US dollar foreign exchange rate has not supported the Australian mining sector due to the Australian dollar's close linkage with commodity prices.
Though earnings momentum has turned "marginally positive" for the sector, lower spot commodity prices have raised risk around consensus FY25 earnings, they said.
What they said: "While valuations metrics have improved, risk appetite metrics for key players like BHP, RIO and FMG are not yet in conviction Buy territory, in our view," the analysts said.
The source: Citi research
