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The BHP Group Ltd (ASX: BHP) share price was in a state of decline on the first trading day of this week.
The electronic gates closed on the Australian share market this afternoon, with BHP shares down significantly. In particular, the value of the mining giant fell by 2.6% to $39 per piece. For context, S&P/ASX 200 Index (ASX: XJO) was down 1.4% on Monday.
What can be attributed to this disappointing move for BHP shareholders?
Iron ore or iron slag?
BHP’s share price took a back seat on Monday as investors cooled off on the commodity-heavy ASX. Overall, the material sector fell by 2.3%, making it the worst performing sector.
Today’s negative move could be attributed to the iron ore price falling to its lowest level since late 2021. According to Economics of tradethe steel-making commodity is now priced at around US$96 per tonne, consistent with November 2021 prices, as shown below.
Pressure on commodities, especially iron ore, is intensifying amid tightening monetary policy. As the world’s economies take steps to try to contain inflationgoods associated with economic growth have come under fire.
Notably, the drop in BHP’s share price — and other mining stocks on the ASX 200 — followed remarks from China suggesting a persistent commitment to zero. COVID-19 politicians. So markets may have been nervous about the impact on the steel industry.
Today’s further decline in iron prices marks the fifth straight week of declines.
Could BHP’s share price be attractive?
With BHP shares trading at roughly the same price as a year ago, some investors may wonder whether the mining company is now undervalued.
Well, Morgans analysts tend to think so, with an add a rating currently held at $198 billion by the giant. Morgans believes that BHP has a low level of risk and has a strong free cash flow generation.
For these reasons, we have a $47.40 price target on BHP shares.