Why is the BHP share price trouncing the ASX 200 today?

BHP shares are charging higher on Monday.

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The BHP Group Ltd (ASX: BHP) share price is leaping higher on Monday.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining giant closed on Friday trading for $44.74 a share. At the time of writing, shares are swapping hands for $45.86, up 2.5%. That's more than four times the 0.58% gains posted by the ASX 200 at this same time.

Here's what's spurring investor interest on Monday.

What's boosting the BHP share price today?

It's not just BHP that's having a strong run today.

Most of the big resource stocks are outperforming, as witnessed by the 1.7% gains on the S&P/ASX 200 Resource Index (ASX: XJR).

The miners are enjoying some heady tailwinds from a surprisingly strong iron ore price, BHP's largest revenue earner.

The commodity used to make industrial metal has, at least for now, defied predictions of a hard fall below US$100 per tonne. Iron ore gained again over the weekend and is currently trading at just over US$114 per tonne. That's up some 10% since 16 August.

The BHP share price is also receiving some help from a 4% increase in the copper price over that same time. The red metal, BHP's number two revenue earner, is currently fetching US$8,500 per tonne.

And investors likely have China to thank for the lift.

Iron ore and copper prices have come under pressure amid low Chinese demand as the nation's economy continues to struggle to achieve targeted growth. China's steel-hungry property sector has been particularly depressed and to date, the government's stimulus efforts have left much to be desired.

However, even the incremental support measures look to be building a positive impact.

Last week, the Chinese government announced that some of China's biggest cities could reduce payments for homebuyers while pressuring banks to reduce mortgage rates. In a connected move, the People's Bank of China cut the foreign currency deposit reserve requirements for banks to 4% from the previous 6%, commencing mid-September.

Commenting on the resulting boost to the iron ore price (courtesy of The Australian Financial Review), ANZ's senior commodities analyst Daniel Hynes called last week's support measures a "drip feed that's had a slightly better impact on the price" than most analysts were forecasting.

However, this may not provide a lasting boost to the BHP share price.

"I do suspect the rally is susceptible to a bit of a sell-off if we don't see any follow-through evidence that [China's] economy is improving," Hynes said.

What else is happening with the ASX 200 mining stock today?

In other news that's unlikely to have a major impact on the BHP share price today, the miner reported that a Brazilian court has ratified the Judicial Reorganisation Plan of Samarco.

The legal proceedings relate to the ongoing fallout, institutions, and restorations following the devastating Samarco tailings dam failure in 2015.

Samaco can now enter into definitive debt restructure agreements with its creditors to implement the debt restructure. According to the release, this will enable to company to "restructure its financial debts and establish a stable financial position to rebuild its operations and strengthen its ability to meet its Renova funding obligations".

Additionally, BHP reported:

Samarco will continue to have primary responsibility to fund the Renova Foundation and each of Vale and BHP Brasil will continue to have secondary responsibility to fund 50% of the Renova Foundation if Samarco does not meet its funding obligations under the Framework Agreement…

Samarco's funding of the Renova Foundation will be capped at US$1 billion for the period CY2024 to CY2030. BHP Brasil and Vale will be required to provide funding to the Renova Foundation during this period to the extent that the funding amount required exceeds the US$1 billion cap.

It's hard to estimate what kind of costs the Renova Foundation could run up to over the six-year period.

Should it greatly exceed US$1 billion, it could see BHP footing a sizeable amount of the reparation bill, which could throw up some longer-term headwinds for the BHP share price.

Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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