BHP Group Ltd (ASX: BHP) shares have just blasted into record territory. If the BHP share price can hold onto its 3.26% intraday gains for roughly another hour, the Australian iron ore and copper mining giant will close at new all-time highs.
BHP's previous record high was $47.54 per share. Shares touched $49.30 in early morning trade today, before retracing some to currently trade at $48.47.
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Why is the BHP share price hitting all-time highs?
After falling hard during the COVID-driven market rout last February and March, the BHP share price has come roaring back, up 92% since 16 March.
Much of the company's success is attributable to the soaring price of iron ore and copper, the two dominant contributors to BHP's earnings.
The iron ore price, above US$160 per tonne, remains near 8-year highs. Copper is also at 8-year highs, trading for US$8,405 per tonne.
That's certainly spelled good news for BHP's earnings. Yesterday the company reported its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at US$14.7 billion for the half-year ending 31 December 2020. That's an increase of 21% from the prior corresponding half.
Of that US$14.7 billion, US$13.9 billion came from its iron ore and copper segments, with iron ore generating EBITDA of US$10.2 billion and copper generating EBITDA of US$3.7 billion.
Iron ore and copper demand
While iron ore prices are widely forecast to slowly retreat over the coming years, strong demand from China's steel factories along with increased infrastructure spending from developed nations looking to kickstart their virus-addled economies should cushion any price falls. Indeed, the iron ore price may well surprise to the upside.
According to analysts at Commonwealth Bank of Australia (ASX: CBA), as quoted by The Australian Financial Review:
China's Two Sessions in early March will prove crucial to China's policy objectives. If policymakers favour growth again this year, particularly through another infrastructure-led stimulus, iron ore prices will track higher than we're forecasting. Another key support for iron ore prices this quarter will be the risk that wet weather plays on iron ore shipments from Australia and Brazil.
Copper demand is also predicted to remain strong, with JPMorgan analysts forecasting a new commodities supercycle is taking form. One that will support copper prices as the world increasingly shifts towards battery storage for power and electric vehicles for transport.
How that all plays out remains to be seen.
But for today, the record high BHP share price will be pleasant news to the company's shareholders.
