As June draws to a close, BHP Group Ltd (ASX: ASX:BHP) finds itself facing significant market pressure. The mining giant’s shares, part of the S&P/ASX 200 Index (ASX: XJO), closed at AU$43.15 on the last trading day of June, with prices dipping further to AU$42.92 in on Friday, representing a 0.53% drop. This follows a decline from May, where BHP shares finished at AU$44.51. Over the course of June, the BHP share price has decreased by 3.7%, significantly underperforming compared to the ASX 200’s 1.3% gain.
Iron Ore and Copper Prices Slide
A key factor behind BHP’s declining share price is the drop in iron ore and copper prices. Iron ore, BHP’s leading revenue generator, fell from US$117 per tonne at the end of May to US$106 per tonne by the end of June, marking a 9% decline. This slump is attributed to the persistent weakness in China’s economy, particularly its struggling steel sector, which has failed to rebound despite various government stimulus measures. The increasing inventories of iron ore in China have further pressured prices, prompting investors to adjust their expectations for BHP’s performance.
Similarly, copper, BHP’s second-largest revenue earner, also faced a downturn, decreasing by 6% in June. Copper prices fell from US$10,135 per tonne in May to US$9,516 per tonne. This drop has compounded challenges for BHP as the company seeks to solidify its position as the world’s largest copper miner. The setback was underscored by BHP’s failed AU$74 billion takeover bid for Anglo American (JO:AGLJ), which was rejected by Anglo’s board on May 30, putting an end to negotiations.
Union Dispute and Operational Hurdles
June also saw BHP embroiled in a legal dispute with the Mining and Energy Union (MEU). The union filed applications with the Fair Work Commission, targeting BHP’s Peak Downs, Saraji, and Goonyella Riverside coal mines. The MEU seeks pay rises for 1,700 labour-hire workers, advocating for “same job, same pay” standards. This dispute, which surfaced on June 12, saw BHP’s share price dip by 0.6% on the day of the announcement.
Market Position Under Threat
The iron ore boom of November 2021, when prices soared above US$200 per tonne, had catapulted BHP past the Commonwealth Bank of Australia (ASX: CBA) to become Australia’s largest company by market cap. However, with iron ore prices plummeting and the CBA share price surging by 28% over the past year, analysts are now speculating that the bank could reclaim its position as the largest ASX-listed entity. Currently, CBA boasts a market cap of AU$213.3 billion, while BHP’s market cap stands at AU$217.3 billion, down 6% over the past year.
As BHP navigates these challenges, investors and analysts will be closely monitoring how the company adapts to the volatile commodity market and regulatory pressures. The outcome of these developments will likely shape BHP’s trajectory in the coming months