BHP Group Ltd (ASX: BHP) shares have gained a whopping 24% since the closing bell rang on 31 October, currently trading for $46.23 apiece.
Not coincidentally, the big lift in the S&P/ASX 200 Index (ASX: XJO) iron ore miner coincides with a 40%-plus increase in the price of iron ore over that same period. Not to mention a 13% spike in the price of copper.
While BHP shares generate roughly half their revenue from iron ore production, copper is the miner's second biggest revenue earner. And the company has plans to expand its copper footprint.
As BHP notes on its website:
We believe the demand for copper will grow due to grade declines at existing copper mines, the radical urbanisation of large populations in China and India and the electrification of energy and transportation. Renewable energy sources, such as wind and solar, also require copper for their infrastructure.
Which brings us to what China's reopening could mean for BHP shares in 2023.
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What impact will China's reopening have?
After fighting to stamp out all traces of the virus for almost three years, Chinese authorities are rapidly rolling back the nation's strict, economy-hindering zero COVID policies.
And as the world's most populous nation and number two economy moves to fully reopen, it could well send the iron ore price sharply higher and see the copper price hit new all-time highs. Both of which would offer some strong tailwinds for BHP shares.
On the iron ore front, Citi analysts have a bullish outlook heading into 2023. The broker cites both China's reopening moves as well as the Chinese government's recent liquidity support measures for the nation's beleaguered, iron ore-hungry property sector.
Should China continue on its reopening path and should the government provide significant further assistance to the property industry, Citi believes the iron ore price could retest US$150 per tonne. That's some 36% above the current price, a boost that would support the BHP share price in the new year.
According to the Citi analysts (quoted by The Australian Financial Review):
China is making meaningful progress towards further reopening. We believe iron ore prices could rally towards $US150 a tonne if China rolls out meaningful credit easing in the next three [to] six months.
"Policymakers appear determined to support debt-trapped property developers. This reduces the downside risk for iron ore," the broker added.
But it's not just resurgent iron ore prices that could bolster BHP shares in 2023.
According to Goldman Sachs, the copper price could hit new record highs next year. That's due to a combination of a forecast reduction in copper output from Chile coupled with a big increase in forecast demand from China.
Goldman also cites China's reopening along with expected surging demand from China's booming green energy sectors.
"The sequential increase in policy targets and commitments to green transition, alongside a minimal supply response so far … have resulted in earlier and larger open-ended deficit conditions that essentially are already here, not beginning at some point in the future," Nicholas Snowdon, metals strategist at Goldman Sachs, said.
Copper prices hit their last all-time highs on 4 March this year, reaching US$10,670 per tonne, helping propel BHP shares higher.
Goldman Sachs is forecasting the copper price will hit US$11,000 per tonne next year. That's some 30% above the current price of US$8,457 per tonne.
How have BHP shares been performing?
Atop some outsized dividend payments, BHP shares, pictured below, have gained 14% over the past 12 months. For some context, the ASX 200 is down 3% over the full year.
