Is the BHP (ASX: BHP) share price a buy? COVID-19 is causing several problems for the resources giant.
What is BHP?
BHP is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas, and has more than 62,000 employees and contractors, primarily in Australia and the Americas. Headquartered in Melbourne, BHP has shares listed on both the ASX and London Stock Exchange (BHP Billiton Plc).
What’s going on for BHP?
The business has a few key pillars. It’s one of the most attractive aspects of BHP as a resource business that it’s diversified.
Demand for oil has collapsed because of all of the COVID-19 impacts. The oil price is a little higher now, but it’s still a lot lower than a few months ago.
Copper and coal prices weren’t at strong points before the COVID-19 crisis and they’re probably not going to rise strongly any time soon.
Iron ore could come under pressure from China as the stoush between Australia and China continues. China just changed the rules on inspecting iron ore, which could be troubling considering when this change has occurred. China has already hit Australian barley. Australian beef is another commodity facing potential difficulties.
Ultimately BHP can’t generate huge profits if the prices and demand for its commodities are down.
Would I buy BHP shares today?
I wouldn’t want to buy BHP shares in this situation. Under $20 could be interesting, but not right now when there’s large potential downsides. Technology shares could be much better ideas:
Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.