The BHP Group Ltd (ASX: BHP) share price rose strongly up until mid-August before plummeting in the following months. The miner’s shares have continued to shed value as investors remain concerned about the iron ore market.
At the time of writing, the BHP share price is down 1.39% to $37.14 this afternoon. This means that over the course of the year, its shares have now dropped by 13.76%.
What’s happened to BHP?
The plunging spot price of iron ore has heavily impacted the miner’s shares.
In May, the steel-making ingredient reached an all-time high of US$229.50 per tonne. BHP shares accelerated on the back of bumper revenues over the period.
However, a slowdown in Chinese demand amid political pressure has led iron ore prices to tumble in recent months.
Currently, iron ore is fetching US$122.36, a drop of 25% since the beginning of 2021. Since the start of the new financial year on 1 July, iron ore prices have sunk 40%.
Chinese lawmakers have introduced new rules for its steel producers in an apparent effort to curb reliance on Australian iron ore and boost domestic supply and demand. Steel mills have been instructed to limit 2021 output to no more than 2020 levels, or face penalties.
China wants its steel industry to halt iron ore production at roughly 1 billion tonnes in 2021. Consequently, Chinese crude steel production has dropped 8% in July, 13% in August, and 12% in September.
To meet its goal, however, steel output will have to contract another 10% over the last 3 months of the year.
China has also increased its efforts to close down some domestic factories to achieve carbon reduction targets. In addition, the country is seeking alternative resources to maintain production.
Macquarie has cut its price target for the BHP share price by 3.6% to $54. Analysts at Morgans have slightly raised their rating by 1.9% to a bearish $46.05.
Based on the current BHP share price, this implies an upside of 45% and 24%, respectively.
BHP share price summary
Over the past 12 months, the BHP share price has moved in circles to post a sub-7% gain.
BHP commands a market capitalisation of roughly $111.10 billion, making it the third most valuable company on the ASX.