The BHP Group Ltd (ASX: BHP) share price is still sitting below $40. At the end of December 2023, it reached above $50. In this article, I'm going to look at whether the ASX mining share can get back to those former heights.
BHP is one of the world's largest miners that's involved with iron ore, copper, coal and potash.
As a commodity business, its shorter-term success is significantly impacted by adjustments in the resource prices. The US tariffs caused a lot of volatility for both share prices and commodity prices. Resource prices impact profitability, so let's look at what some analysts are expecting, and how that could impact the BHP share price.
Analyst forecasts
According to Trading Economics, the iron ore price is currently sitting at around US$100 per tonne, despite all of the volatility caused by US tariff impacts.
At US$100 per tonne, the biggest ASX iron ore shares of BHP, Fortescue Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) are well-placed to continue generating solid profits thanks to their impressively low production costs.
However, the last time the BHP share price was above $50, the iron ore price had reached around US$140 per tonne. I'm not sure if the iron ore price is going to get back that high any time soon, particularly with how the Chinese economy is being challenged by the US tariffs (currently 30%) on the Asian superpower. China is a key buyer of iron ore (and other commodities), so its demand for iron ore is essential for BHP.
Broker UBS is currently forecasting that the iron ore price could drop to US$85 per tonne in 2026 and US$88 per tonne in 2027.
UBS is projecting that BHP could generate US$9.9 billion of net profit after tax (NPAT) in FY25, US$7.7 billion in FY26 and US$10.2 billion in FY27. It's not until FY29 that UBS predicts that BHP's net profit can rise above US$13 billion (with a forecast profit of US$13.1 billion). Copper earnings growth is likely to play a key part in the BHP share price's possible rise towards $50 as it works on various compelling copper projects around the world.
BHP share price valuation
If BHP does make US$13.1 billion of net profit in FY29, a BHP share price of $50 would imply a price/earnings (P/E) ratio of around 12.5x. I think that's certainly possible.
But, to get there sooner than FY29, I think a sizeable rally of the iron ore price from where it is today would be required. It could happen, but it's very difficult to know where resource prices are headed. A strong iron ore price may require substantial Chinese financial stimulus to support its economy.
But, don't forget, a good portion of returns for owners of BHP shares will come from the dividends. I think that payments can continue to be pleasing and provide good returns for shareholders.
UBS has a price target of $40 on the business, implying a slight rise over the next year, compared to where it is today. I think the BHP share price can rise, but it could take a few years to rise close to 30% (to $50).
