Home Sports Why is BHP’s share price falling on Friday?

Why is BHP’s share price falling on Friday?


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The BHP Group Ltd (ASX: BHP) in morning trading on Friday, the share price fell by 3.94%.

The Iron Ore ASX The giant closed yesterday at $39.46 per share and is currently trading at $37.91.

But it is not just BHP’s share price that is under pressure today.

The S&P/ASX 200 Index (ASX: XJO) is down 0.63% after a day of falls in US markets overnight. But materials stocks are making it much tougher, as evidenced by the 2.6% drop. S&P/ASX 200 Materials Index (ASX: XMJ).

As for BHP’s main competitors, then Fortescue Metals Group Ltd (ASX: FMG) share price decreased by 7.41%, and shares in Rio Tinto Ltd (ASX: RIA) decreased by 4.18%.

Why is there a big sale today?

BHP’s share price collapsed after iron ore prices fell to US$84.45 a tonne, the lowest level in two years.

The industrial metal was still trading at just over US$159 a tonne in early March, meaning prices have fallen more than 47% from their 2022 peak. Going back a bit, in May 2021, iron ore was priced at US$229 per tonne.

With BHP deriving roughly half of its revenue from iron ore, the miner’s share price tends to correlate closely with the current and forecast price of the steel-making metal.

Current prices, as we know, have fallen to a two-year low. This is largely due to the prospect of a slowdown in the world economy, a decrease in demand for an important construction metal.

The focus is, in particular, on China. Steel-hungry real estate markets in the world’s most populous country are in decline. And China is still struggling with economic shutdowns because of it CORONAVIRUS INFECTION COVID-zero policy.

Looking ahead

As for the outlook for the iron ore price and, by extension, BHP’s share price, the Federal Budget offered a rather bleak assessment. The Budget predicts that the iron ore price will fall to US$55 per tonne (FOB, Australia) by the end of the first quarter of 2023.

Commonwealth Bank of Australia (ASX: CBA), however, is of considerable importance higher forecast for iron ore.

“The Budget’s forecast for iron ore prices is lower than our forecast for the outlook period,” CBA said in its Economic Assessment Report.

The bank noted:

Overall, we expect iron ore prices to bottom out in Q1 2023 as China’s policies continue to impact demand due to the zero-policy of COVID-19. China’s departure from COVID-zero by the end of March 2023 should lead to higher iron ore prices in the coming quarters.

BHP share price snapshot

Despite today’s decline, BHP’s share price is up 3% over the past 12 months. That compares with an 8% full-year loss posted by the ASX 200.


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