The iron ore price has been tumbling lately, so are BHP Group Ltd (ASX: BHP) shares still worth buying?
BHP shares are up 1.07% today, trading at $39.51 apiece at the time of writing. For perspective, the S&P/ASX 200 Index (ASX: XJO) is up 1.38% so far today.
Let's check the outlook for BHP shares.
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Iron ore prices fall amid China Covid-zero policy
BHP is a major iron ore producer. In fact, iron ore accounted for more than half of BHP's total earnings in FY22. BHP also explores copper, potash, and coal, among other commodities.
The iron ore price closed down 1.55% overnight, fetching US$95 a tonne, Trading Economics data shows. It's the lowest level since November last year. Iron ore was trading at around US$160 a tonne in March and for almost US$230 a tonne in May 2021.
Iron ore prices are continuing to fall amid news China is maintaining its COVID-19 zero strategy, curtailing the nation's economic growth prospects. China is the largest iron ore importer in the world. In a research note, ANZ economist Felicity Emmett said:
China has reiterated it will adhere to its COVID policy, and things were further complicated by the recent surge in cases. Negative margins and production curbs to reduce air pollution are leaving more downside for steel production.
Meanwhile, Commonwealth Bank of Australia (ASX: CBA) analyst Vivek Dhar said China easing its COVID-19 policy would have been "potential salvation" for commodities, the Australian Financial Review reported.
However, despite the macro headwinds, some analysts have recently seen potential upside for the BHP share price.
Macquarie placed an outperform rating with a $45 price target on BHP shares in early October. Goldman Sachs also recently maintained a buy rating on BHP shares with a $40.50 price target. Meantime, Morgans has an add rating on BHP shares, however, the broker has cut its price target on the company's shares to $47.40.
Share price snapshot
BHP shares have risen 13% in the past year, while they are up nearly 7% year to date.
For perspective, the ASX 200 has lost nearly 9% in the past 12 months.
BHP has a market capitalisation of more than $200 billion based on the current share price.
