Why are BHP shares sliding today?

It's not just BHP shares in decline today. The S&P/ASX 200 Resource Index (ASX: XJR) is down 1.5%.

| More on:
asx iron ore share price crash represented by meteor speeding through space

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • BHP share are down 1.8% in afternoon trade
  • The ASX 200 miner is under pressure amid a big overnight fall in iron ore and copper prices
  • Weak demand out of China is denting the near-term outlook for industrial metals

BHP Group Ltd (ASX: BHP) shares are down 1.8% in early afternoon trade today.

Shares in the S&P/ASX 200 Index (ASX: XJO) iron ore miner closed yesterday trading for $44. Shares are currently changing hands for $43.22 apiece.

The 1.8% decline in BHP shares is significantly more than the 0.2% fall posted by the ASX 200 at this same time.

But the 1.5% drop in the S&P/ASX 200 Resource Index (ASX: XJR) gives us some clue of why Australia's biggest miner is coming under selling pressure today.

What's happening with the iron ore price?

BHP shares, as you'd expect, are very sensitive to the price of iron ore, the miner's biggest revenue earner.

And iron ore continued its slide, tumbling 5.2% overnight to trade for US$97.90 per tonne.

That's the lowest price for the industrial metal since mid-November. And it was only on 15 March that iron ore was trading for just US$134.04 per tonne.

Adding to the pressure on BHP shares today, copper (the miner's number two revenue earner) also dropped 3.7% overnight to US$8,163.50 per tonne. That puts the copper price down 10% since mid-March.

Both metals have come under pressure amid lower demand from China's factories, as the nation's vaunted reopening isn't going quite to plan.

That's precisely what Citi analyst Wenyu Yao cautioned late in April when Citi forecast the iron ore price could test US$90 per tonne before finding support.

"We have been cautious on China's steel demand and iron ore amid an uneven economic recovery and heightened policy risk, though things have unravelled sooner than our base case," she said.

"We see potential risk for further downside below US$100 a tonne if steel demand fails to show meaningful improvement," Yao added.

Indeed, as witnessed by the slump in BHP shares today, that further downside risk looks to be eventuating.

How have BHP shares been performing longer-term?

BHP shares have seen some big price swings alongside the iron ore and copper prices.

Over the past year, the ASX 200 miner is down 3.8%. But investors who snapped up shares at the recent lows on 7 September will be sitting on a gain of 19.2%.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

A mining worker wearing a white hardhat and a high vis vest stands on a platform overlooking a huge mine, thinking about what comes next.
Dividend Investing

BHP shares have fallen out of the global top 20 dividend payers. Here's why

Global dividends continue to climb.

Read more »

Miner standing in front of a vehicle at a mine site.
Resources Shares

Is the worst now over for Mineral Resources shares?

What's next for the miner?

Read more »

A miner holding a hard hat stands in the foreground of an open cut mine
Resources Shares

A close look at BHP shares. What is the mining giant's next move?

Let's take stock of what the experts think.

Read more »

Miner looking at a tablet.
Resources Shares

Short bets on Pilbara Minerals shares are declining. Is now the time to buy?

Could the trade be unwinding?

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

'I hate what I have done': Mineral Resources share price down as Ellison laments actions

Managing Director Chris Ellison says he deeply regrets the impact of his 'error of judgement'.

Read more »

A man in shirt and tie uses his mobile phone under water.
Resources Shares

The Lake Resources share price is sinking yet again. Here's why

The longer-term downtrend continues.

Read more »

Miner and company person analysing results of a mining company.
Resources Shares

With a P/E ratio of 6, is the Fortescue share price a bargain?

Let’s dig into whether Fortescue shares are good value or not, in my eyes.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

Down 15% this year, where's the next stop for Rio Tinto shares?

Where to next for the miner?

Read more »