BHP Group Limited (JSE: BHG) suffered a challenging start to 2024, with its share price falling to a 12.74% year-to-date (YTD) decline. Its latest interim results reported earlier this week did little to support its struggling price, as the mining giant slashed its dividend per share from $0.90 to $0.72 amid volatility in global commodity prices and softer-than-expected demand in developed markets.
BHP reported a 6% year-over-year increase in revenue to $27.2Bn, driven by higher iron ore and copper prices. Iron ore’s average realized price increased by 21% from the prior year to $103.70/wmt, while production was down 2% at 129Mt. On the other hand, copper production increased by 7% to 894kt, with the average realized price ticking up by 5% to $3.66/lb. Overall, unit costs increased by 5.4% on the normalization of commodity-linked consumable prices such as diesel. However, its attributable profit slumped by 86% to $927M from $6.46Bn as the company incurred large losses from the oversupply of its nickel resources. Underlying EPS fell slightly from $1.303 to $1.296 but still managed to exceed expectations of $1.13.
For the full year, BHP expects its copper production to fall between 1.7M tonnes and 1.9M tonnes, while iron ore production is expected to reach 254M – 264.5M tonnes. Nickel output also remained unchanged at 77,000 – 87,000 tonnes.
Technical
On the daily chart, the price has formed a prolonged downtrend. The 100-SMA (orange line) is at a point of convergence with the 25-SMA (green line), signalling a bearish tilt in the shorter term. The RSI lingers near oversold conditions, keeping the bulls in play, but resistance at R554.69 could prevent any hopes of a bullish breakout in the upcoming sessions.
If the price remains below this level at today’s close, support at R545.76 could come into play. Any sustainable movement below this level could confirm a continuation of the trend. The bearish trend could steepen toward R534.87 before a psychological demand zone at R523.11 could hold buyers for a potential retracement. However, if the demand zone fails to provide a boost, the price could slip further toward R511.99.
However, if the price sustainably breaches the R554.69 support, the dynamic resistance of the channel could be vulnerable. A breakout could lead the price toward the 61.8% Fibonacci golden ratio at R567.76, where the 25-SMA and 100-SMA provide further resistance. A retracement could kick off at this level to test the strength of the breakout, and if support at the initial breakout level holds, the price could move toward R574.08 and R581.49, the Fibonacci midpoint.
Summary
BHP Group Limited’s fortunes failed to reverse following its latest interim earnings report, as its share price remains under bearish pressure. Resistance at R554.69 could be crucial in the upcoming session to determine whether the price has the legs to test the dynamic resistance of the descending channel.
Sources: Koyfin, Tradingview, Reuters, BHP Group Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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