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Why is BHP’s share price continuing to fall?

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Shares in the mining giant continue to fall, so what should investors do?

Shares in iron ore miner BHP have slid in early trading on Wednesday following further downgrades on the price of iron ore.

Following a tumultuous month for the mining giant, BHP has now seen its shares fall nearly 20% over the last month and by more than 30% in just 2 months.

At the time of writing, the stock had regressed 2.4% in early morning trading.

Why are BHP shares sliding?

The shares in the mining giant have continued their regression, following the price of iron ore falling from near record highs.

Shares in mining companies often mirror the prices of the commodities which they produce.

With demand for Australian iron ore collapsing, the price of BHP has crumbled with it.

What is driving the price of iron ore down?

A combination of regulation changes from Beijing to cap steel output as well as the Evergrande saga has seen iron ore prices plummet.

The price of iron ore peaked at record highs of $233 on 12 May, but since then the price has fallen off a cliff.

Following a slight rebound on Monday, the price of iron ore is down again today falling by US$6.30 or 5.3% to US$112.35 per tonne.

As such BHP’s share price has fallen in the early morning trading.

However, BHP was not alone in the market pullback.

The materials sector was down 1.9% as iron ore miners were hit by another drop in the bulk commodity’s price.

Mineral Resources declined 4.6% to $43.79, Fortescue Metals fell by 1.8% to $14.61 and BlueScope Steel tumbled 6.2% to $19.65.

Buying opportunity for investors?

Despite the demand for iron ore falling, AMP Capital’s chief economist Dr Shane Oliver recently told Finder that the price of mining stocks remain relatively low.

He highlights that the price of iron ore was always going to "fall back to earth sooner or later".

“The iron ore price has fallen from levels no one ever thought it would get to and is still very high and well in its marginal cost of production (which is around US$14 to US$30 a tonne,” he said

Following the pull back, shares in the miners remain low on a relative price to earnings (P/E) ratio.

“They were already cheap – trading on 8x forward earnings at the end of August, so after 30-40% falls they are now very cheap,” Dr Oliver said.

Considering investing in BHP shares?

If you are keen to buy shares in BHP, consider investing through an online share trading platform.

Bear in mind that not all platforms offer the same set of stocks. Some only offer US stocks, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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