The S&P/ASX 200 Index (ASX: XJO) has had a promising start to this week’s trading so far on Monday morning. At the time of writing, the ASX 200 is up a healthy 0.67% at 7,465 points. The BHP Group Ltd (ASX: BHP) share price has joined in this optimism this morning. BHP shares are currently up by 1.3% at $38.14 a share. So what’s pushing up BHP shares this Monday? Could the iron ore price be responsible?
Currently the ASX 200’s second-largest constituent by market capitalisation, BHP is the largest mining company in the country and one of the largest in the world. However, BHP shares are still primarily influenced by the market fluctuations of its most important commodity: iron ore.
What’s going on with the iron ore price?
BHP’s recent run to a new record high was indeed driven by an unprecedented boom in iron ore pricing. It was only a few months ago that the iron ore price was above US$200 a tonne, a historically sky-high level. This, together with record dividend payments, helped push BHP shares from the $43 a share level we saw at the start of the year to an all-time high of $54.55 by August. That’s a rise of more than 26%.
However, more recently, iron ore has been acting as a handbrake on BHP shares. Since reaching those new highs in early August, BHP shares have plummeted. The company is now around 30% off of those all-time highs as it stands today. Indeed, at the current BHP share price, the company is now down 11.4% in 2021 so far.
So that brings us back to the current iron ore price. What’s been going on with this most important commodity?
Well, iron ore is still well below the levels we saw only a few months ago. Saying that, it’s still had a pretty decent time over the past week or so. As my Fool colleague James covered this morning, benchmark iron ore prices rose 2.2% to US$119.52 a tonne on Friday night. Perhaps with this rise, investors are hopeful the worst of the iron ore price falls are behind BHP. At least for now.
Could BHP shares be a buy today?
As the Fool covered last week, broker Morgans is bullish on BHP shares at their current level. Morgans rated BHP as an add, with a 12-month share price target of $46.05 a share for the miner. That implies a potential future upside of close to 22% on current levels. Morgans reckons BHP has been oversold by investors, and is eyeing a “double-digit dividend yield” from BHP shares over the current financial year (FY2022).
At BHP’s current share price, this iron ore giant has a market capitalisation of $111.08 billion and a dividend yield of 10.62%.