BHP Billiton Limited (ASX: BHP) was back on top today with its shares lifting 1.6%, in line with the gains recognised by the broader market.
Like most other miners, BHP has come under enormous pressure in recent months as a result of crashing commodity prices – especially iron ore and oil.
Although the price of iron ore has rebounded strongly from its 10-year low levels from April, many analysts believe the price is unsustainable and that it could fall below US$40 a tonne by the end of the year.
While there is no way of knowing with any certainty whether those forecasts will become a reality just yet, I will go on record as saying I believe iron ore prices are destined to fall significantly further at some point in the near future.
At the same time, oil prices are under pressure as a result of a massive supply and demand imbalance, as are coal and copper prices. Together, these four commodities make up BHP's core operations, so it's easy to see why investors have become so bearish on the company's prospects.
Although it is unclear why BHP's shares have risen so strongly today (given that iron ore and oil prices both fell overnight), it appears as though investors are simply getting caught up in the good mood supporting the wider market as investors switch off from the situation in Greece and focus on picking up solid, discounted stocks.
Personally however, I don't believe BHP Billiton is worthy of new investment dollars just yet given the strong headwinds facing the sector, and the uncertainty regarding future commodity price movements. The same can be said for fellow iron ore miners, Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO), which gained 4.6% and lost 0.1% today, respectively.
