BHP Share Price Down as It Releases Quarterly Update

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At time of writing, the share price of BHP Group Ltd [ASX:BHP] is down 2.18%, trading at $38.51 per share.

As you can see in the chart below, the BHP share price has taken off since late-November following a disaster at a Brazilian iron ore mine, with the stock breaking above its 20-, 50- and 100-day moving averages, as well as experiencing a slight recent pullback.

BHP Share Price

Source: tradingview.com

The latest news out of the company is its quarterly activities report which reveals the extent of the disruption caused by Cyclone Veronica.

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Cyclone Veronica impacts BHP’s iron ore production

As we covered yesterday in our Rio Tinto Ltd [ASX:RIO] update, Cyclone Veronica lead to a disruption of iron ore supply coming out of Western Australia.

In its quarterly activities report, BHP revealed that production guidance for FY2019 has been reduced to between 235 and 239 Mt or 265 and 270 Mt on a 100% basis. This is a fall of 6–8 Mt due to the cyclone.

Unit costs have risen by $1 to $15 per tonne as a result of a number of factors, including lower volumes and direct costs of remediation and maintenance.

The company also noted the impact of a train derailment on 5 November 2019.

Production levels across BHP’s petroleum, metallurgical and energy coal divisions were unchanged compared to the same time last year. Copper production is down 3%.

With its Atlantis Phase 3 project in the US Gulf of Mexico approved and its drilling at Bélé-1 in Trinidad and Tobago encountering hydrocarbons, BHP CEO Andrew Mackenzie said:

During the March 2019 quarter, we had a strong operational performance despite weather impacts across Australia and Chile. We approved Atlantis Phase 3 and now have five major projects under development. Those projects, our work on transformation, technology and culture, and our successful petroleum and copper exploration and appraisal programs will grow value and returns for years to come.

Will the BHP share price continue to rise?

With iron ore a staple of BHP’s revenue, the outlook for the commodity is a major part of the BHP share price puzzle.

After a strong surge since November, there are signs that iron ore prices may level out in the coming months as the various grades hit highs not seen since 2014.

Steel demand is forecast to reach 1.735 billion tonnes this year — up 1.3% on last year. 2020 is also expected to see a further 1% rise.

Al Remeithi, Chairman of the Worldsteel Economics Committee, said:

In 2019 and 2020, global steel demand is expected to continue to grow, but growth rates will moderate in tandem with a slowing global economy. Uncertainty over the trade environment and volatility in the financial markets have not yet subsided and could pose downside risks to this forecast.

With the BHP share price buoyed by the news out of Brazil, combined with an off-market buy-back and a special dividend resulting from the sale of its Onshore US assets, investors may be considering taking profits on BHP if they held shares prior to November.

Regards,

Lachlann Tierney,
For Money Morning

PS: Get the names of 10 mining stocks that are primed for a stellar 2019. Our free report gives you an in-depth look at the sector.

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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