The BHP Group Ltd (ASX: BHP) share price has seen plenty of volatility in recent times. Is it going to rise in October and beyond? Or has it seen the best of 2022 earlier this year?
As Australia's biggest company, what happens with BHP is important for both the economy and the S&P/ASX 200 Index (ASX: XJO).
BHP is a massive commodity business. That means that profit and sentiment can be highly influenced by changes in resource prices.
Iron ore has been the key profit generator for BHP over the past few years. The fall of the iron ore price by more than a third since April has seen the BHP share price drop by more than 25% to its current price of $38.60.
How are things looking for the BHP share price and commodities?
I think BHP is in a reasonable situation. It's true that China is not paying the same amount for iron ore per tonne that it was earlier this year. But, demand can be cyclical – it's not going to be the same every single year.
China has been affected by COVID lockdowns, a weakening outlook for the global economy, and uncertainty about its own housing sector.
Despite those issues, the iron ore price is still above US$90 per tonne and in Australian dollar terms, the price has improved as the Aussie dollar weakened compared to the US dollar.
On the coal side of BHP's business, it is making a lot more profit as coal prices soar. This is offsetting a large part of the decline in profit from the iron business.
Copper prices have reduced, however, the company expects copper demand in the long term to grow as the world increasingly goes through electrification and decarbonisation.
What do analysts think of the business?
It's difficult to forecast where resource prices will go next. However, there are a number of opinions out there on BHP.
The broker Macquarie has a price target of $44 on the business, implying that it could rise by more than 10% over the next 12 months. Macquarie thinks BHP can benefit from the strong coal pricing.
With the 2023 financial year in mind, the broker thinks the BHP share price is valued at 11x FY23's estimated earnings with a projected grossed-up dividend yield of 9.7%.
The broker Morgan Stanley rates BHP as equal-weight, which is kind of like a hold, but the price target is $43.20, implying a possible rise of more than 10%. It recently increased its long-term forecasts for commodities like copper and iron ore.
One broker that isn't so optimistic is UBS. It has a price target of just $35.50 on the BHP share price, which implies a possible drop of almost 10%.
It thinks that key commodity prices will fall over the next year or two, which could then impact BHP's profitability.
