Why is the BHP share price tumbling again on Friday?

The BHP Group Ltd (ASX: BHP) share price is currently down 1.8%, adding to yesterday’s fall.

Since the end of August, BHP shares have now fallen by around 10%.

Yesterday’s decline may have largely been due to BHP reaching the ex-dividend date. This simply means that new investors buying shares aren’t entitled to the final FY22 dividend.

In theory, BHP shares aren’t worth as much in the short-term if investors aren’t entitled to the large dividend.

However, that’s old news now.

Why is the BHP share price falling?

Well, you’d need to ask each individual seller why they’re selling today, at a lower price.

But, there could be a few different factors.

It’s certainly possible that a few more investors decided to sell their shares after the ex-dividend date.

But there could be other things happening.

The S&P/ASX 200 Index (ASX: XJO) is currently in the red by 0.25%, so BHP may be suffering from general market negativity, though BHP itself is responsible for a sizeable part of that decline considering BHP is such a large part of the overall ASX 200 index.

Iron ore price sinks

However, the thing that may be on investors’ minds the most is changing commodity prices.

As a resource business, BHP’s ability to generate profit is heavily dependent on the commodity price.

The costs of mining iron ore don’t really change whether the iron ore price is US$10 higher or US$10 lower per tonne. So, a higher price can largely add straight to the net profit after tax (NPAT) line (after paying the government a bit more). But the reverse is true when the iron ore price drops as well, which can hurt the BHP share price.

Commsec pointed out that overnight:

Iron ore futures slid US$8.37 or 8% to US$96.39 a tonne after the lockdown of Chengdu revived fears that the virus will continue to hamper China’s economic recovery.

An 8% fall in the iron ore price is a hefty fall in one day.

Lockdowns may not be permanent, but it does increase uncertainty for the market.

However, iron ore isn’t BHP’s only commodity – its portfolio includes other resources like copper, nickel and potash.

The company also recently tried to buy the ASX copper miner OZ Minerals Limited (ASX: OZL), but that was knocked back.

BHP share price snapshot

Over the last six months, BHP shares have dropped 24%.

The post Why is the BHP share price tumbling again on Friday? appeared first on The Motley Fool Australia.

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More reading

• Another tough day on the ASX; and BHP goes ex-dividend. Scott Phillips on Nine’s Late News
• Why BHP, Deep Yellow, Nickel Industries, and PointsBet shares are dropping
• Why is the ASX 200 diving 2% on Tuesday?
• How did ASX 200 dividend shares stack up in August?
• Reason for hope as ‘worst month of the year’ starts off badly

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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