From fresh record highs in early August to 5-month lows, things are getting ugly for iron ore miners.
The post BHP (ASX:BHP) share price slides for 4th straight session, down 14% this week appeared first on The Motley Fool Australia. –
Buy the rumour, sell the news
The BHP share price was up a solid 24.5% year to date in the week prior to its FY21 results being released.
Shares in the iron ore major closed at $52.81 last Friday, even though iron ore prices had already collapsed below ~US$170/tonne.
BHP released its FY21 results on Tuesday 17 August. On that day shares fell 1.42% to $51.33.
But this was just the beginning of the harsh correction.
The BHP share price would free fall 8.06% on Wednesday to $47.70 and slide another 6.35% on Thursday to a 5-month low of $44.67.
It seemed the market anticipated record earnings due to sky-high iron ore prices for most of FY21. And instead, it used this as an opportunity to sell.
The BHP share price has tumbled 14.21% this week, with its year-to-date return shrinking to just 3.74%.
What else is driving the BHP share price lower?
BHP has acknowledged the potential challenges ahead, with its economic and commodity outlook report citing:
…the increasing likelihood of stern cuts to steel output in China in the current half year, as affirmed by China’s peak industry body in early August, is testing the bullish resolve of the futures markets. Prices have decreased materially in late July and early August, but they remain extremely high relative to history at around $160/t at the time of writing.
Going forward, we expect that, in addition to structural market based drivers, safety and environmental inspections are likely to have a material influence on the average level and seasonal volatility of Chinese domestic iron ore production.
The volatility in iron ore price could drive uncertain performance in the BHP share price in FY22.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.