The BHP Group Ltd (ASX: BHP) stock price has suffered through a difficult 2024 to date, down 17% from its 52-week high, as we can see on the chart below.
The ASX mining share has suffered from its nickel operations closing (and the sizeable impairment), a significant drop in the price of iron ore, a failed acquisition attempt of Anglo American, and the ongoing repercussions of the Samarco disaster.
However, when it comes to ASX resource shares, it can be possible to identify cyclical opportunities which may have been oversold.
Resource prices are certainly not consistent, so when conditions are weak, it could be the right time to invest.
I'm going to look at whether this is a good time to pounce on BHP shares.
Lower iron ore price
The iron ore division is essential for BHP as it usually generates the lion's share of the profit. Therefore, it usually plays a big role in the BHP stock price.
When a commodity price goes down, it hurts revenue and significantly cuts into profitability. The mining costs are generally the same regardless of whether the iron ore price is $10 higher or lower per tonne. So, a reduction in revenue largely comes straight off the net profit too.
2024 has seen the iron ore price go from above US$140 per tonne to around US$100 per tonne at the time of writing. This has significantly reduced the potential monthly profit generation of the business.
Trading Economics notes that data from China showed manufacturing activity contracted slightly faster in July, following a decline in June and May. Services sector growth slowed to an eight-month low. There are also concerns regarding an impending implementation of new steel rebar standards in China that "could trigger an inventory sell-off".
However, Trading Economics also reported that "China's leaders pledged to step up support measures and stabilize market confidence at a Politburo meeting this week. The meeting stressed the need to boost consumption to realize growth targets, a shift from previous focus on infrastructure projects."
Promising exposure to copper
Copper is one of the most important commodities for decarbonising and electrifying the world. It's needed for the electricity grid, electric vehicles, renewable energy generation, and more. It may eventually become the most important commodity for BHP stock.
BHP recently announced its latest investment in copper, costing BHP a total cash payment of US$2.1 billion. The ASX mining share will be a joint venture partner that will develop the copper projects within the Vicuna district.
According to Rio Tinto Ltd (ASX: RIO), global copper demand is set to grow between 1.5% and 2.5% per year. This growth comes as good copper deposits are becoming harder to find.
BHP's rising exposure to copper seems like a smart, long-term strategy.
Is this the right time to invest in BHP stock?
The lower the BHP share price goes, the better value it becomes, in my opinion.
Without a crystal ball, it's hard to know how low the BHP share price will fall. However, the lower it goes, the less we're relying on a stronger iron ore price. Of course, there's a chance the iron ore price could surprise and rebound. After all, the last few commodity price rallies weren't widely expected.
I think the copper exposure is valuable, and I hope to see BHP continue to increase its exposure for the right price.
I'd personally prefer to invest if the BHP share price were below $40 because I believe there's a fair chance the iron ore price, and therefore the miner's profit and dividend, could go lower in the next few years due to the potential for more iron ore supply from Africa (for example Simandou).
According to UBS, the business is expected to generate US$12.7 billion of net profit in FY25 and US$2.51 of earnings per share (EPS). That puts the current BHP share price at 11x FY25's estimated earnings.
