The BHP Group Ltd (ASX: BHP) share price has rebounded 6% in June. But with it still being down 10% from 1 February 2023, is it a buy?
BHP is a major producer of iron, copper, nickel and coal. Iron is typically the major profit generator for the company.
What’s going on with the BHP share price?
BHP short-term time success seems to be heavily dependent on how commodity prices are going. The business has suffered from a fall in the iron ore price over the last few months from around US$130 per tonne down to less than US$100 per tonne.
But, according to Trading Economics, the iron ore price has rebounded to US$108 per tonne, so it’s not surprising that the BHP share price has recovered in the last week or so.
It was suggested by Trading Economics that the market is betting the Chinese government will rollout sizeable stimulus to support the “debt-ridden but essential property sector.”
BHP’s iron profit could remain strong enough to generate good profit and pay solid dividends.
Promising growth for other resources
BHP’s growing exposure to copper, nickel and potash is also encouraging because these are resources exposed to the decarbonisation theme.
The company’s potash project Jansen is making good progress and could be operational for decades. This commodity can be used to help farmland remain as productive as possible, but not be as bad for the environment.
Worldwide electrification could continue to drive demand for copper and nickel for the next decade.
Time to buy BHP shares?
I think it’s possible to make very good returns with BHP. Over the last four years, we’ve seen the BHP share price drop over 30% three times – COVID, second half of 2021 and the middle of 2022, but then rebound.
This doesn’t strike me as the right time to buy BHP for a market-beating return. I believe it’s better to wait for when investors are more pessimistic about iron or the company itself.
Having said that, I expect it will continue to pay a good dividend yield over the next two years, unless the iron ore price were to collapse.
