Why the BHP share price looks set to cross $50 again
Shares in resources giant BHP have climbed 22% in the last 6 months.
Shares in the world’s biggest resources company normally see a steady performance, but today might be one of those rare days when even the BHP stock records sharp gains. At the time of writing, BHP shares were up nearly 3.5% at $49.55, and look set to breach the $50 level again.
What is driving sentiment in the BHP stock price
Shares in the big miners are turning red hot today after iron ore prices on the Chinese commodity exchanges surged for the second straight session.
Benchmark iron ore prices jumped 10.3% in Tuesday’s session to close at US$209.10 a tonne, following a 5% rise the previous day.
This comes despite Chinese regulators in recent weeks warning against speculation and authorities raising export tariffs on some steel products and lifting margin requirements for iron ore futures contracts in an effort to cool down prices.
But that has proven difficult to sustain amid rising steel production in the world’s second largest economy as demand continues to grow from its infrastructure and manufacturing sectors.
BHP is Australia’s second biggest iron ore exporter and should therefore be a key beneficiary from the current spike in prices of the key steelmaking raw material.
Energy gains
BHP’s energy business is often overshadowed by its iron ore prowess, but the resources giant holds significant oil and gas assets worldwide, producing approximately 300,000 barrels of oil equivalent (boe) per day.
The outlook for that business got a boost on Wednesday after crude oil prices rallied to a two-year high of US$70.25 a barrel.
The price lift was triggered by a decision from the Organization of the Petroleum Exporting Countries (OPEC) to lift oil production cautiously over the next several months as the global economy recovers from the coronavirus-related slowdown and demand returns to normal.
BHP reported a 20% lift in half year profit and lifted its dividend payout in February. Analysts now expect full year results to again reveal a bumper profit, and a further increase in dividend.
That could mean further gains for investors on top of the 22% increase in its share price over the last six months.
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