The BHP Group Ltd (ASX: BHP) share price has dropped more than 14% in 2024 to date, while the S&P/ASX 200 Index (ASX: XJO) has managed a gain of more than 4%. As the chart below shows, it has been a disappointing period for the ASX mining share.
It's certainly possible that the BHP valuation could keep falling. The question is – how likely is that?
Commodity prices can be difficult to predict, but we've certainly seen the iron ore price worsen during 2024.
Commodity pain
BHP's biggest profit generator is normally the iron ore segment. However, according to Trading Economics, the iron ore price has gone from above US$140 per tonne at the start of the year to under US$110 per tonne now. I think that explains why BHP shares have fallen in the last several months.
We've seen the iron ore price drop below US$100 per tonne a handful of times in the last few years, so it's not impossible for it to drop another 10%.
Trading Economics reported that recent data showed iron ore inventories in Chinese ports have reached a near two-year high, which implies weaker demand from Chinese steel mills for metal production. There was also weaker-than-expected inflation in China during June.
Optimistic analysts are hopeful that China will introduce new stimulus at the Third Plenum next week as the country aims to achieve 5% economic growth this year.
Trading Economics' forecast for the iron ore price, based on global models and analyst expectations, suggests it will fall to US$99 per tonne in 12 months. If it does fall below US$100 per tonne, then I'd suggest BHP shares would face headwinds.
The copper price is lower than its 2024 highs earlier in the year, falling to US$4.55 per pound because of the weak demand in China. Trading Economics predicts the copper price could rise to US$4.73 per tonne. Copper is becoming increasingly important in the BHP portfolio as it looks to build exposure to the electrification commodity and take advantage of forecasted growing demand.
Where to next for the BHP share price?
On the whole, analysts are more positive than negative on the business. According to a Commsec collation of analyst recommendations, there are no sell ratings, 16 hold ratings and nine buy ratings.
The broker UBS currently has a neutral rating on BHP shares, with a price target of $44, which implies only a slight increase over the next year.
UBS forecasts BHP could generate $55.5 billion in revenue, $23.6 billion in earnings before interest and tax (EBIT), $13 billion in net profit after tax (NPAT), and pay a dividend per share of $1.54.
