The BHP Group Ltd (ASX: BHP) share price is down 3.94% in morning trade on Friday.
The ASX iron ore giant closed yesterday trading for $39.46 per share and is currently trading for $37.91.
But it's not just the BHP share price under pressure today.
The S&P/ASX 200 Index (ASX: XJO) is down 0.63% following a down day in US markets overnight. But materials stocks are doing it far tougher, as witnessed by the 2.6% drop in the S&P/ASX 200 Materials Index (ASX: XMJ).
As for BHP's chief competitors, the Fortescue Metals Group Ltd (ASX: FMG) share price is down 7.41% while shares in Rio Tinto Ltd (ASX: RIO) have slipped 4.18%.
Why the big sell-down today?
The BHP share price is getting hammered after iron ore prices slipped to US$84.45 per tonne, the lowest level in two years.
In early March the industrial metal was still trading for just over US$159 per tonne, meaning prices are down more than 47% since the 2022 peak. Go back a bit further and in May 2021 iron ore was trading for US$229 per tonne.
With BHP generating approximately half its revenue from iron ore, the miner's share price tends to be closely correlated to the current and forecast price of the steel-making metal.
Current prices, we know are down to two-year lows. That's largely due to the prospect of a slowing global economy, diminishing demand for the construction critical metal.
China, in particular, is in focus. The steel-hungry real estate markets in the world's most populous nation are in the doldrums. And China is still grappling with economic-hampering shutdowns due to its COVID-zero policies.
Looking ahead
As for the outlook for the iron ore price, and by extension the BHP share price, the Federal budget offered a fairly gloomy assessment. The budget forecasts the iron ore price will slide to US$55 per tonne (Free on Board (FOB) Australia) by the end of Q1 2023.
Commonwealth Bank of Australia (ASX: CBA), however, has a significantly higher forecast for iron ore.
"The Budget's iron ore price forecast is lower than our outlook through the outlook period," CBA said in its Economic Insights report.
The bank noted:
We broadly expect iron ore prices to bottom in Q1 2023 as China's COVID-zero policy continues to weigh on demand. A shift away from China's COVID-zero by the end of March 2023 should see iron ore prices lift in the following quarters.
BHP share price snapshot
Despite today's slide, the BHP share price remains up 3% over the past 12 months. That compares to an 8% full-year loss posted by the ASX 200.
