BHP (ASX:BHP) share price drops despite 10-year iron ore highs

The BHP Group Ltd (ASX: BHP) share price is sliding after the mining giant unveiled its third-quarter result. We take a look at the details.

| More on:
A worried miner looks at his phone in front of a massive drilling, indicating a share price drop for ASX mining companies

Image source: Getty Images

The BHP Group Ltd (ASX: BHP) share price is falling this morning after the global resource giant released its third-quarter update.

At the time of writing, the BHP share price is trading 1.63% lower to $46.68.

Why is the BHP share price falling lower?

Investors have been selling the miner’s share this morning after the company posted its quarterly activities report for the period ended 31 March 2021.

According to the announcement, BHP achieved record production at Western Australia Iron Ore (WAIO). Additionally, the company accomplished record average concentrator throughput at its Escondida copper mine.

Following the quarter’s performance, production guidance for FY21 remains unchanged for petroleum and iron ore. However, guidance for the company’s copper production has increased to between 1,535 kt to 1,660 kt. This reflects the strong performance from Escondida.

On the metallurgical coal front, BHP has reduced its guidance to between 39 Mt and 41 Mt due to poor weather conditions. The lower expected coal volumes have also increased expected unit costs for Queensland Coal to US$74 and US$78 per tonne.

Iron ore prices hit a 10-year high

The BHP share price appears unfazed by the continued iron ore price momentum. The steelmaking commodity hit 10-year highs in the past 24 hours, as demand continues to outstrip supply.

Brazilian iron ore producer Vale fell short of expected production numbers last night, aiding in further upwards movement. The iron ore spot price lifted to US$189.61, setting the field for a potential US$200 per tonne price if the momentum continues.

BHP’s iron ore production for the last quarter came in at 66 Mt, which has also fallen short of the 67.2 Mt projected by Macquarie. The company’s production was impacted by various obstacles during the quarter, including weather and equipment maintenance.

Outlook for BHP

The company continues to invest in further projects. At the end of March 2021, BHP counted 4 major projects under development across petroleum, iron ore, and potash. These projects combined carry a combined budget of US$8.5 billion over the project’s life. All of the projects remain on track.

The US$3.06 billion South Flank iron ore project is on track to begin production by the middle of the year.

Meanwhile, BHP has been making an effort to find ways of reducing its greenhouse gas emissions. In February, the company committed US$15 million over a 5-year partnership with Japanese steel producer JFE to investigate potential options.

In addition, the company committed a further US$15 million over 3 years with China’s HBIS Group Co to explore GHG emissions reduction technology.

Despite the gain in iron ore prices, the BHP share price is not alone in today’s selloff. Rio Tinto Limited (ASX: RIO), Mineral Resources Limited (ASX: MIN), and Fortescue Metals Group Limited (ASX: FMG) are all trading lower. Consequently, the S&P/ASX 200 Index (ASX: XJO) is feeling the pressure, sliding 0.93% at the time of writing.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Materials Shares