The BHP Group Ltd (ASX: BHP) share price has suffered a sizeable drop over the last six months, falling by around 20%.
Considering the massive size of the BHP market capitalisation, the 20% drop represents a large fall in dollar terms.
But, can things turn around quickly or will BHP shares be in the doldrums for some time?
Don't forget, BHP no longer owns a petroleum division, so it's not benefitting from the high prices and useful cash flow.
When it comes to commodity ASX shares, they are heavily reliant on the resource price. A rise in the resource price can largely add to profit, which can then help the share price.
But, the opposite has been happening with the iron ore price, which has dropped substantially in the last few months.
According to reporting by the Australian Financial Review, analysts at Morgan Stanley are not confident about iron ore this year
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Will there be an iron ore recovery for BHP?
In possible bad news for the BHP share price, Morgan Stanley commodities strategist Marius van Straaten said:
We see little reason to be bullish on iron ore into year-end. Any real rebound in the iron ore price hinges on a China-led steel demand recovery.
One of the biggest questions for iron is what happens with steel in China. As reported by the AFR, Chinese property construction accounts for around 40% of steel demand. June property starts were down 45%.
It has also been reported that mortgage arrears are increasing on properties currently being constructed in China. Borrowers don't want to pay when no progress is being made on the construction of their property.
Van Straaten said:
While this latest situation might be contained and property activity might not slow further from current levels, there are as yet no signs of a meaningful recovery.
Low steel profit margins may also have been hurting steel production within the Asian superpower. But, the AFR reported that Macquarie has pointed out that steel margins have been improving recently thanks to rising steel prices and a weaker iron ore price.
Is the BHP share price an opportunity?
Part of the investing thoughts about BHP at the moment include the attempt to buy OZ Minerals Limited (ASX: OZL) with a cash bid of $25 per share.
As reported by my colleague Tony Yoo, the broker Morgans said:
If nothing else, this development should reduce any concern that BHP might have been considering a larger, more transformative acquisition.
There has been a consistent fear from some that history would repeat itself and BHP eventually [becomes] attracted to a +$100 billion acquisition/merger at a high point in the cycle. Instead, BHP has remained on-strategy and focused.
Morgans' price target of $48.40 on the BHP share price suggests a bounce back over the next 12 months of more than 20%.
Macquarie is another broker expecting good things for BHP shares with a price target of $48. That also implies a rise of more than 20%.
However, UBS is much less optimistic. It's 'neutral' on the business, with a price target of just $35.50. That implies a further drop of around 10%.
The BHP share price closed 2.22% higher on Thursday at $39.15.
