Can BHP Share Price Break Out In 2024?

BHP Group Ltd (BHP) is a leading global resources company that produces commodities like iron ore, copper, and coal. The Australia-based mining giant operates across the Americas, Australia, and Asia.

Read on to learn how macroeconomic trends, commodity dynamics, company fundamentals, and changing investor sentiment all impacted the BHP share price in 2023. We’ll also discuss the future of BHP stock based on its run entering 2024.

Bearish Forces Weigh on BHP Share Price in First Half of 2023

BHP stock started 2023 strong, reaching an opening high of $50.21 in January. However, market headwinds quickly gathered, exerting downside pressure on the share price over the next several months.

Slowing global economic growth was a concern, especially in China, a key export market for commodities. Tightening monetary policies from central banks also stoked fears of recession in major economies like the U.S.

With the demand outlook weakening, commodity prices softened in early 2023. Prices for iron ore and copper, two of BHP’s most essential commodities, declined from their mid-2022 peaks.

Rising inflation continued squeezing BHP’s margins as well. The company was already dealing with supply chain problems and higher costs in 2022. Persistent inflationary pressures further eroded profitability.

Geopolitical instability surrounding the Russia-Ukraine war added to the uncertain operating environment. The conflict impacted commodity flows and kept volatility elevated.

These mounting headwinds caused investors to dump BHP stock through the first half of 2023.

Read this article for more insights: Supply and demand - Key factors in commodities trading

BHP Share Price Bottoms Out in May Before Rebounding

The $42.02 closing price in May would mark the lowest point for BHP stock in 2023. From here, the share price started stabilizing and gradually recovering as sentiment improved.

One driver was moderating inflation, reducing the margin squeeze on companies like BHP. Central banks also signalled a potential pause in interest rate hikes, easing fears of an imminent recession.

Meanwhile, China rolled out more supportive policies for its real estate sector and infrastructure spending. This cushioned its economic slowdown, supporting better demand for steel, iron ore, and other commodities.

BHP also took active measures to strengthen its cost competitiveness and productivity. The company optimized maintenance timing, enhanced its supply chain, and streamlined operations. These initiatives delivered cost savings that boosted profitability.

With lower costs and stabilizing commodity prices, BHP’s earnings were better than feared. The company’s half-year results, released in February 2023, beat analyst estimates - a positive surprise that further lifted investor sentiment.

You might also like to read: TLW Share Price Trends and Predictions

BHP Share Price Recovers Strongly in November and December

Buoyed by BHP’s resilient operations and an improving macroeconomic backdrop, the BHP share price regained its momentum in November and December 2023.

The BHP share price closed at $46.30 in November, reflecting a 10% gain from the May low. The upward trajectory continued in December, with BHP stock closing at $50.41 to end the year.

This end-of-year surge can be attributed to several supportive factors converging:

• Global growth appeared to be stabilizing, with risks of a severe downturn fading. This pointed to firmer commodity demand on the horizon.
• Supply constraints for commodities like oil and copper also emerged, setting the stage for tighter balances and higher prices.
• BHP maintained strong free cash flow and a robust balance sheet. It boosted shareholder returns through dividends and buybacks.
• Institutional investors turned bullish on mining stocks, seeing attractive valuations after months of underperformance.

With tailwinds aligning and sentiment improving markedly, it’s not surprising BHP shares reclaimed the $50 level during December 2023. The stock recouped nearly all the ground lost earlier in the year.

BHP Positioned for Potential Gains in 2024 After Defying Headwinds

As we enter 2024, the BHP share price is holding at around $51 - building on the positive momentum from December 2023. After surviving last year’s challenges, is BHP poised for bigger gains in the year ahead?

The answer may hinge on several factors to watch:

• The Global Economy - A recession could weigh on commodity demand and reverse recent share price gains. But further progress on inflation and growth could spur BHP higher.
• China - With extensive exposure to China, BHP remains vulnerable to shifts in Chinese stimulus and infrastructure policies.
• Commodity Markets - Tighter supplies point to a constructive outlook. But surprise stock could pressure prices.
• Cost control - BHP must maintain its cost and productivity improvements to protect profit margins.
• Financial strength - Continued robust cash flow and a healthy balance sheet give BHP flexibility to reward shareholders.

While risks and uncertainty persist, BHP has proven its operational resilience during difficult times. Its diversified portfolio also buffers it from overexposure to any single commodity.

As long as macro conditions don’t deteriorate sharply, the company can sustain its recovery. Patient long-term investors could be rewarded again in 2024.

Here’s an interesting read for you: Best Strategies You Must Use For Trading in Commodities

In Summary

The ups and downs of the BHP share price in 2023 highlight the multitude of forces that can impact a global commodities company’s stock performance.

From slowing economic growth and inflationary pressures to geopolitical instability and shifting commodity prices, BHP contended with strong headwinds yet ultimately regained its footing.

While the company exhibited operational resilience, its stock remains tied to broader macroeconomic trends, China’s policies, commodity market dynamics, and investor sentiment shifts.

This underscores the importance of understanding risk factors and honing trading skills for retail investors considering BHP or other commodity stocks.

Success requires monitoring price indicators, from global GDP forecasts to copper inventories, and adjusting one’s strategy and position-sizing accordingly.

Before putting capital at risk, you must thoroughly research commodities markets, study price trends and volatility, and determine your comfort with potential losses.

Learn and trade with markets.com: The ultimate trading community!

“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”