Are BHP shares about to pounce, or could the iron ore price spoil the party?

Could BHP go higher?

| More on:
2 people at mining site, bhp share price, mining shares

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 shares have jumped 5% in the last month
  • Analysts have a buy rating on the company's share price 
  • However, the outlook for the iron ore price could play a part in the BHP share price performance 

The BHP Group Ltd (ASX: BHP) share price has climbed in the last month, but can this top run continue?

BHP shares have lifted 5.3% from $44.08 at market close on 16 May to $46.43 at market close on Friday. For perspective, the S&P/ASX 200 (ASX: XJO) has slipped 0.22% in a month.

So what is the outlook for the iron ore price, and how could this impact BHP shares?

Will BHP shares lift?

Like Rio Tinto Ltd (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG), BHP is a major iron ore-producing giant. Iron ore is used to make steel.

The biggest iron ore importer in the world is China. Therefore, economic news out of China can influence market sentiment on the iron ore price.

The outlook for iron ore is varied and appears to be changing almost on a daily basis at the moment.

Early last week, iron ore prices descended amid a caution from Goldman Sachs that property weakness could drag on China's economy.

Citi Group also cut its iron ore forecast to $100 in the third quarter and $90 in the fourth quarter of this year in early June.

Discussing the iron ore price in quotes cited by Bloomberg, China Industrial Futures Co analyst Wei Ying said:

We noticed some bulls are exiting as investors are cautious in chasing a rally like this.

After all, the iron ore market will be in a slight surplus in the second half and we expect inventories at Chinese ports to increase.

However, iron ore prices rallied later in the week on the back of news China is considering stimulus measures for the economy. Commenting on this prospect in a research note on Thursday, ANZ economist John Bromhead said:

Iron ore futures extended recent gains as investors bet on further stimulus measures boosting demand for iron ore and steel.

Sentiment was supported by data from the China Iron and Steel Association that showed steel output at major Chinese mills jumped 6.5% in early June from late May.

ANZ commodity strategists Daniel Hynes and Soni Kumari are concerned muted steel demand from China property markets could be a key headwind for iron ore in the future, forecasting: "We see prices finding a floor near US$95 a tonne".

Copper prices could also impact the BHP share price going forward. In early May, BHP finalised the deal to take over Oz Minerals. This provides BHP with more exposure to copper via the Prominent Hill and Carrapateena mines. BHP already owns Olympic Dam, also in South Australia.

Meanwhile, analysts at Goldman Sachs are predicting BHP will pay total fully franked dividends of US$1.90 in FY 2023 and US$1.50 in FY 2024.

Goldman has a buy rating on BHP in light of a "major opportunity" to grow copper production. Analysts said:

For BHP, we continue to believe that its major opportunity (and challenge) is growing copper production and offsetting copper reserve depletion and grade decline in Chile, and growing copper production and capturing synergies in South Australia.

BHP share price snapshot

The BHP share price has risen 5.48% in the last year, while it has elevated 1.73% in the year to date.

Created with Highcharts 11.4.3BHP Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

This ASX 200 mining share has a market capitalisation of just over $235 billion based on the latest share price.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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

Miner looking at a tablet.
Resources Shares

What happened with the BHP share price in May?

Did you buy BHP shares in May? Here’s how much the ASX 200 miner returned.

Read more »

Miner looking at a tablet.
Resources Shares

Should I buy Fortescue shares today?

A leading investing expert offers his verdict on the outlook for Fortescue shares.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.
Resources Shares

Is this a good time to buy BHP shares?

Should investors jump on the ASX mining shares right now?

Read more »

Miner looking at a tablet.
Broker Notes

Why Macquarie expects this ASX 200 copper stock to surge 36% in a year

Macquarie forecasts some hefty gains ahead for the ASX 200 copper miner. But why?

Read more »

A young African mine worker is standing with a smile in front of a large haul dump truck wearing his personal protective wear.
Resources Shares

Following its FY25 result, Macquarie tips more than 40% upside for this ASX All Ords mining stock

Let’s dig into why this is such an exciting stock.

Read more »

Miner looking at a tablet.
Resources Shares

Macquarie forecasts 30% upside for this ASX All Ords mining stock

If a broker is right, investors have a lot to gain with this stock.

Read more »

Miner looking at a tablet.
Resources Shares

Should I buy Pilbara Minerals or Mineral Resources shares? Here's Macquarie's take

Mineral Resources and Pilbara Minerals shares are both down more than 60% in a year, but Macquarie forecasts a big…

Read more »

Miner looking at a tablet.
Resources Shares

Does Macquarie rate Fortescue shares a buy, hold or sell?

Down 42% in a year, does Macquarie think Fortescue shares are now a good buy?

Read more »