Bernstein downgrades BHP shares on lack of upside potential

Investing.com -- Bernstein has downgraded BHP Group (LON:BHPB) Ltd ADR (NYSE:BHP) (ASX:BHP) shares from Outperform to Market-Perform, citing limited upside following a reduction in iron ore price forecasts starting in 2026.

The broker also lowered its price target on BHP to £19 from £20 per share.

BHP’s U.S.-listed shares fell more than 1% in premarket trading Tuesday.

The downgrade comes amid a broader shift in Bernstein’s outlook on the iron ore sector, as new supply, particularly from Simandou, is expected to push the market into surplus over the coming years.

Analysts now see iron ore prices stabilizing in the $79–85/t range in real 2025 dollars, well below previous assumptions.

“We downgrade BHP from Outperform to Market-Perform as we don’t see meaningful upside after lowering our iron ore price estimates from 2026 onwards,” analyst Bob Brackett said in a note.

Brackett acknowledged that the previous upgrade in September 2024 had captured some early momentum in iron ore prices, but said it was ultimately offset by investor concerns around BHP’s long-term copper strategy.

Bernstein expects global iron ore supply to grow by 2.2% per annum through 2030, outpacing expected demand growth of just 0.5% annually. The result, according to Bernstein, is a market that will be “well supplied over the next decade,” further pressuring margins and valuations for producers like BHP.

In addition to the BHP downgrade, Bernstein also trimmed its price target on Rio Tinto (NYSE:RIO) by 10% to £56 per share, while maintaining an Outperform rating. The firm cited potential offsets from Oyu Tolgoi copper growth and Simandou iron ore development, which could help balance softer iron ore pricing.

Anglo American (JO:AGLJ) remains rated Market-Perform, with its target reduced by 4% to £22 per share, reflecting limited upside of 6%. Vale SA ADR (NYSE:VALE) also retains a Market-Perform rating, as Bernstein cut its target by 7% to $11.25, implying 15% upside.