Morningstar's commodity outlook and top stock picks

Tue 19 Dec 23, 12:10pm (AEST)
Outlook binoculars positive
Source: Shutterstock

Key Points

  • Iron ore and metallurgical coal prices are expected to remain strong in 2024, driven by demand from steelmaking
  • Nickel prices are likely to stay under pressure due to increased supply from Indonesia
  • Lithium demand is forecast to outpace supply, leading to higher prices in 2024

Darling commodities like iron ore and uranium are set to end a tumultuous year with gains of 70% and 22% respectively – which is remarkable given the global rate hike cycle, China's economic slowdown and geopolitical uncertainty.

The share prices of the all-important BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) have trended higher off the back of gains in iron ore. The same can't be said about anything else. The percentage of commodities trading above their 200-day moving averages has fallen to levels not seen since the March 2020 Covid crash, according to SentimenTrader.

So what does 2024 have in store for us?

Morningstar's Commodity Outlook

Here are Morningstar's commodity price assumptions for both next year and long-term.

The key forecast changes compared to the previous quarter include iron ore (2024 outlook upgraded by 10%), metallurgical coal (2024 outlook upgraded by 22%) and nickel (2024 outlook downgraded by 10%).





Long-term (from 2027)

Alumina (US$/t)





Aluminium (US/lb)





Copper (US$/lb)





Gold (US$/oz)





Iron Ore (US$/t)





Lithium carbonate (US$/t)




14,661 (from 2032)

Met coal (US$/t)





Nickel (US$/lb)





Thermal coal (US$/t)





Key Insights and Takeaways

Iron ore: Iron ore prices have soared in recent weeks amid elevated steel production from China. But the analysts warn that "steelmakers are losing money," which will result in "falling premiums for high-grade iron ore and shrinking discounts for lower-grade iron ore." From a supply perspective, Morningstar expects total iron ore sales from major miners to rise approximately 14% to 2027. This reflects a recovery from Brazilian heavyweight Vale as well as incremental rise from Australian majors.

2023-12-19 11 18 53-18.12.23 Morningstar Mining Pulse.pdf - Personal - Microsoft​ Edge
Source: Morningstar

Copper: "While demand from China, 55% of global consumption, remains strong, rising western interest rates has slowed economic growth and drives recessionary concerns," the analysts said. Supply headwinds from major mines (closure of Cobre de Panama mine was worth 1.5% of global mined capacity and Anglo American reducing 2024 outlook) has helped keep prices relatively rangebound this year.

Metallurgical coal: "Metallurgical coal is likely to remain in demand for blast furnace/blast oxygen method steelmaking for many years as green steelmaking technologies are unlikely to be economic for the foreseeable future," the analysts said. Rising steel production in India is forecast to broadly offset falling production from China.

Nickel: Nickel prices are down almost 50% year-to-date amid a flurry of lower grade supply from Indonesia. "This is likely to persist as more projects start. Indonesian supply also weighs on battery-grade nickel prices," the report notes.

Lithium: Morningstar expects lithium demand to again outpace new supply growth, and for prices to experience a bounce in 2024.

2023-12-19 11 29 10-18.12.23 Morningstar Mining Pulse.pdf - Personal - Microsoft​ Edge
Source: Morningstar

Top Picks and Fair Value

Iluka Resources (ASX: ILU)

  • Commodity: Mineral sands

  • Year-to-date performance: -29%

  • Last close: $6.77

  • Fair value estimate: $10.50

  • Rationale: "... concerns are more than reflected in its share price. Longer-term, maturing mines and a lack of large, high-grade, undeveloped resources are likely to support mineral sands prices. The company's proposed rare earths refinery at Eneabba is an option on elevated rare earths prices."

2023-12-19 11 45 12-Iluka Resources Ltd (ASX ILU) Share Price - Market Index
Iluka Resources 12-month price chart (Source: Market Index)

Whitehaven Coal (ASX: WHC)

  • Commodity: Metallurgical and thermal coal

  • Year-to-date performance: -23%

  • Last close: $7.22

  • Fair value estimate: $10.00

  • Rationale: "We think its deal to buy two metallurgical coal mines from BHP is a good one, diversifying its production to roughly half thermal coal, half metallurgical coal ... Both high-quality thermal coal and metallurgical coal are likely to be supply restrained due to ESG concerns and regulatory opposition, which could support prices longer-term."

2023-12-19 11 46 49-Whitehaven Coal Ltd (ASX WHC) Share Price - Market Index
Whitehaven Coal 12-month price chart (Source: Market Index)

Newmont (ASX: NEM)

  • Commodity: Gold

  • Year-to-date performance: -17%

  • Last close: US$41.09 (Morningstar refers to NYSE listed price)

  • Fair value estimate: US$53.00

  • Rationale: "We think Newmont’s shares are undervalued given its weak sales volumes in the first nine months of 2023, which have led to elevated unit cash cost."

South32 (ASX: S32)

  • Commodity: Diversified

  • Year-to-date performance: -19%

  • Last close: $3.25

  • Fair value estimate: $3.90

  • Rationale: "Undemanding valuation metrics, diversified portfolio of future-facing commodities and strong balance sheet are attractive. Its strategy is to transition its portfolio to metals such as aluminium, alumina, copper, and zinc, commodities more likely to benefit from decarbonization and electrification."

2023-12-19 11 45 37-SOUTH32 Ltd (ASX S32) Share Price - Market Index
South32 12-month price chart (Source: Market Index)


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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