BHP share price forecast as the commodity supercycle intensifies

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 14, 2021
  • The BHP share price rebounded on Thursday, becoming the best performer in the FTSE 100.
  • The stock rose as the commodity supercycle continued.
  • Analysts expect that the company will boost its payouts to shareholders.

The BHP (LON: BHP) share price popped by more than 3.7% on Thursday as mining groups surged. This rally made it the best performing FTSE 100 stock. The shares are trading at 1,992p, which is about 12% above its lowest level in September. 

Commodities supercycle?

BHP is one of the biggest miners in the world, with a market capitalisation of more than £101 billion. The company has operations in tens of countries globally. It specializes on several metals like iron ore, copper, nickel, coal, potash, and potash. Therefore, the company does well when the prices of these metals rise.

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In the past few days, the prices of most of these metals has bounced back. For example, coal has jumped to a record high as its demand has surged. Indeed, many countries like India are currently running out of coal to power its power plants. China, the biggest consumer of coal, has also faced some supply shortages. 

Similarly, the price of iron ore remains steady even as China implements measures to lower its price. Iron ore is an important metal that is used in the manufacture of steel. Nickel, on the other hand, has jumped to a multi-year high as demand from electric vehicle manufacturers rise.

Therefore, BHP will benefit substantially as the commodity supercycle continues. A supercycle is a period where the prices of commodities rise because of supply and demand imbalances. In the past few months, demand for metals has jumped while supply remains under pressure. 

The BHP share price is therefore rising as investors anticipate better revenue growth in the second half of the year. As a result, the company could boost its dividends and share buybacks. The company has paid dividends worth more than $36 billion in the past five years. It has a dividend yield of about 10% that is backed by a payout ratio of 89%.

BHP share price forecast

BHP share price

The BHP share price has staged a strong comeback in the past few days. The stock has managed to move above the key resistance level at 1,850p, which was the lowest level in June and March. It is now attempting to move above the 100-day moving average while the two lines of the MACD are making a bullish crossover. 

Therefore, the share price will likely keep rising as the commodity supercycle continues. If this happens, it will likely retest the key support at 2,250p. Still, investors should be aware that the company has announced that it will delist from London. Investors can buy its stock in US OTC markets and in Australia.

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