Why is the BHP (ASX:BHP) share price having such a lousy start to the week?

What’s happened to the Big Australian’s shares?

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The BHP Group Ltd (ASX: BHP) share price is off to a disappointing start this week. This comes despite the company not making any new announcements to the ASX.

At market close, the mining giant’s shares have slipped 0.72% on Monday to $41.10. But, regardless of the drop, the company’s shares have rebounded almost 13% in the past month.

What’s dragging BHP shares lower?

There are a couple of possible reasons as to why the BHP share price languished in negative territory today.

First and foremost, the S&P/ASX 200 Materials Index (ASX: XMJ) spent most of the day in the red before rallying late in the day to close 0.13% up at 16,372.8 points. The sector represents 39 of the largest companies that specialise in mining, forestry products, and construction materials.

It appears generally negative sentiment on the company’s home sector is weighing down the BHP share price.

Fellow miner Rio Tinto Ltd (ASX: RIO) also spent Monday well in the red before edging 0.24% in the green about twenty minutes before the close, finishing at $98.23 apiece.

In addition, another catalyst that may be affecting the BHP share price is that investors are holding around 8% of the company’s shares in short positions.

There’s belief that iron ore prices could give back their recent gains, which will put pressure on the company’s margins. This could potentially mean the world’s second-largest miner would miss its earnings targets set for FY22.

Currently, the spot price for iron ore is US$111.64 per tonne. And while it’s recovered from the 52-week lows of US$91.98 last month, there’s still a long way to go.

On a positive note, the company’s proposed acquisition of its petroleum business by Woodside Petroleum Limited (ASX: WPL) is on track. The Australian Competition and Consumer Commission (ACCC) did not oppose the takeover.

The competition regulator commented:

We examined the proposed acquisition closely as it would combine two of the four largest domestic natural gas suppliers in Western Australia.

We found that post acquisition, Woodside would continue to face competition from a range of suppliers of domestic gas, including major producers Chevron and Santos, and from several other smaller suppliers including Shell and ExxonMobil. Woodside’s share of domestic gas after the acquisition will be approximately 20 per cent.

What do the brokers think?

A number of brokers updated their view on the BHP share price over the last week.

Analysts at Macquarie raised their price target by 2% to $52.00 for BHP shares. Swiss investment firm UBS had a more bearish tone, reducing its outlook by 3% to $37.00. It’s worth noting that this is almost in line with the current share price.

BHP share price summary

Since the beginning of the year, it has been a substandard result for BHP shares, falling by almost 5%. This is a stark contrast from when its shares were tracking more than 25% higher for the year-to-date period during August.

Based on today’s price, BHP presides a market capitalisation of roughly $121.2 billion and has approximately 2.95 billion shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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