Generally, nickel isn’t quite as good an economic barometer as copper is. But it can still be a sign of industrial demand, and right now, it’s not looking particularly brisk. In fact, mining company BHP Group (NYSE:BHP) is down nearly 3.5% in Tuesday afternoon’s trading, thanks largely to a steep decline in the price of nickel.
BHP reported a substantial drop in its half-year net profit figures, coming in at $927 million for the June-December period. That’s around a 90% drop from the June-December period in 2022, which makes for a disaster. BHP lost ground writing down the Nickel West operation in Western Australia. It also had to set money aside for costs related to a 2015 tailings dam disaster.
The Market Itself Is Shaky
While under normal circumstances, large-scale payouts like the tailings dam tend to have little impact, there’s a larger problem at stake for BHP: the nickel market itself. The Australian government, reports note, has stepped in to help backstop struggling nickel miners, complete with tax credits, possible loans, and more.
But given that the nickel market itself is facing a “structural change,” these may not be helpful enough. After all, just three years ago, we heard how the promise of electric vehicles would hike demand for nickel. But now, as electric vehicles are losing demand in favor of gas and hybrid vehicles, that sudden surge of nickel demand isn’t what it looked like before.
Is BHP a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BHP stock based on three Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 7.05% loss in its share price over the past year, the average BHP price target of $56.81 per share implies 2.44% downside risk.
