The BHP Group Ltd (ASX: BHP) share price is bucking the wider selling trend today.
Shares in the S&P/ASX 200 Index (ASX: XJO) iron ore miner closed Friday trading for $44.16. At the time of writing, BHP shares are swapping hands for $44.20.
That puts the BHP share price a whisker into the green at 0.09% higher, while the ASX 200 is down 0.4%.
A range of factors impacts the big miner's share price performance. But with iron ore still counting as BHP's number one revenue earner, that's a big one for investors to keep an eye on.
What's the outlook for the iron ore price?
Iron ore is currently trading for US$105 a tonne.
That's up from a recent low of just under US$100 a tonne on 5 May and a recent high of just over US$134 a tonne on 15 March,
Those are some unusually large price swings for the industrial metal, which in turn has seen some volatility in the BHP share price.
Most of that has to do with China. Namely, the uncertainty surrounding the outlook for steel demand from China's mills to supply to the nation's oft-booming but currently wobbling real estate sector.
With that in mind, ANZ Group Holdings Ltd (ASX: ANZ) senior commodity strategist Daniel Hynes has downgraded the bank's short-term outlook for the iron ore price.
"We see the risk of another leg down for prices as relatively high," Hynes said (quoted by The Australian Financial Review).
ANZ now has a short-term price target of US$95 a tonne on iron ore, 9.5% below the current price. Should the iron ore price take that next leg down, it would throw up some additional headwinds for the BHP share price in the three months ahead.
While Chinese home sales ticked up over the first quarter, spurred by government stimulus measures, new housing starts fell by 28%. Which bodes poorly for short-term steel demand.
Compounding the short-term outlook is an increase in the supply of iron ore.
According to Hynes:
Without any improvement on the horizon, steel mills are likely to start reducing output in coming months. This is likely to lead to further weakness in the iron ore market.
We expect the market to move into surplus in the second quarter, compounded by a rise in supply. This should see the stubbornly persistent market deficit haunting end users over the past two years return to surplus in 2023.
But the iron ore price – and by connection the BHP share price – is expected to increase in the second half of the year.
According to ANZ, that's based "on expectations of a stabilisation in demand as China's housing market improves".
BHP share price snapshot
The BHP share price is down 7% over the past 12 months.
Longer-term, shares in the ASX 200 miner are up 34% over five years.
