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It was a painful week for them BHP Group Ltd (ASX: BHP) Share price following the slump in iron ore prices and the release of the company’s much-anticipated results for fiscal year 21.
Buy the rumor, sell the news
BHP’s share price rose a solid 24.5% year-to-date in the week leading up to the release of FY21 results.
The iron ore major’s shares closed at $ 52.81 last Friday, despite iron ore prices falling below ~ $ 170 / tonne.
BHP released its results for Fiscal Year 21 on Tuesday, August 17th. On that day, stocks fell 1.42% to $ 51.33.
But that was just the beginning of the tough correction.
BHP stock price would fall 8.06% to $ 47.70 on Wednesday and fall another 6.35% to a 5-month low of $ 44.67 on Thursday.
It appeared that the market was expecting record gains for most of FY21 due to sky-high iron ore prices. And instead, it used this as an opportunity to sell.
The price of BHP shares fell by 14.21% this week, with the yield falling to just 3.74% since the beginning of the year.
What else is driving BHP shares down?
BHP recognized the potential challenges of the future and cited in its report on the economic and raw materials outlook:
… the increasing likelihood of drastic cuts in steel production in China during the current six months, confirmed by China’s top industry leaders in early August, tests the optimistic determination of the futures markets. Prices fell significantly in late July and early August, but remained extremely high by historical standards at around $ 160 / t at the time of going to press.
In the future, we expect that in addition to structural market-based factors, safety and environmental inspections will have a significant impact on the average level and seasonal volatility of Chinese domestic iron ore production.
Iron ore price volatility could affect the uncertain performance of BHP stock price in FY22.