Why the BHP share price looks set to cross $50 again

Posted: 2 June 2021 1:25 pm
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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.

Considering buying BHP shares?

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

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, 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.

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.

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