The shares of the world’s biggest commodities producer, BHP Group Ltd (ASX: BHP), were given a strong boost today by a record rally in commodity prices including iron ore and copper metals.
In fact, the BHP share price at one point reached a new record high of $46.98, but has pulled back slightly to trade at the current price $46.92, rising by 6.13%.
Other mining shares also climbed today, with the Rio Tinto Limited (ASX: RIO) share price surging by almost 8%, and Fortescue Metals Group Limited (ASX: FMG) higher by almost 4%.
What’s driving the BHP share price to record highs?
The rise in the BHP share price today is driven by increases in commodity prices across the board.
The price of iron ore reached US$168/tonne overnight in London trading, before retreating to the current price of US$166. The industrial metal has been rising steadily since October 2020, and has been hovering at levels not seen since 2011.
The record rise in iron ore has mostly been underpinned by huge demand from China, which in 2019 was making half of the world’s crude steel. Iron ore is of course the main ingredient in making steel.
The recent rally has also been caused by an apparent undersupply in the market, after giant Brazilian miner Vale SA cut its production guidance all the way to 2022 following an accident at one of its mines in December.
Investors are also flocking to BHP’s shares today, as the price of copper shot to an 8-year high. In London trading on Wednesday, the price of the copper metal rose to US$8,103.50 a pound.
The demand for copper has also stemmed from Chinese demand, particularly as China has now begun ramping up its smelting capacity again after COVID-19 closed some of the facilities.
About the BHP share price
The BHP share price has risen by 18% over a 12-month period.
The company provided cost guidance of US$13 to US$14 a tonne for its iron ore operations in FY21. As the world’s biggest commodity producer, BHP commands a market valuation of $130 billion.
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Motley Fool contributor Eddy Sunarto owns shares of BHP Billiton Limited. 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.
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