The BHP Group Ltd (ASX: BHP) share price has had a very nice 3 months. BHP shares were pushing over the $40 mark back in February on the back of a strong economy, rising demand for high-yielding ASX dividend shares and rising commodity prices. But, like with most ASX shares, BHP shares were smashed in the March market crash that was sparked by the spread of the coronavirus pandemic. Between 22 January and 16 March, the BHP share price lost more than 38% of its value.
But since mid-March, BHP has staged a remarkable recovery. After hitting a low of $24.05 on 16 March, BHP shares have climbed almost 40% — going off of today's share price (at the time of writing) of $35.02. Over the same period, the S&P/ASX 200 Index (INDEXASX: XJO) has regained around 18.6% or close to 29% from its own low point on 23 March.
BHP is a diversified mining giant that would easily be the largest company on the ASX if it wasn't for the company's London, Tokyo and New York cross-listings. The company has 4 core commodity operations: coal, copper, oil and iron ore.
So, what's behind this dramatic revaluation of the 'Big Australian'?
BHP shares on the rise
To understand the renewed sentiment behind the company's share price, we only need to look at how the prices of the commodities BHP extracts and processes have been holding up. Over the course of the year, coal, oil and copper prices took a huge hit on the back of the coronavirus crisis. The copper price has recovered somewhat from lows reached in March and April. As has oil to a lesser extent, although WTI crude fell to below 0 at one point during April, so the base for recovery was very low.
But iron ore prices (which is BHP's biggest earner) have had a remarkable year. The iron ore price is today sitting above US$100 per tonne, which is close to its highest level in almost a year. Even in the depths of the coronavirus crash, iron prices didn't drop below US$78 a tonne. This was surprising for many investors, as iron ore is a volatile commodity that has fairly direct links with global economic growth. But a supply squeeze in the Brazilian iron ore industry has resulted in dramatic falls in output from Brazil's Vale (a rival iron miner), which in turn has kept iron ore prices above US$90 a tonne since mid-May and over $100 a tonne since the start of June.
As a result of this, investors are expecting strong earnings from BHP shares this year, which will likely lead to strong dividend payments for shareholders in a year where many ASX companies are struggling to pay dividends at all. It's these factors that have lead to such a robust recovery in BHP shares since March.
