BHP PLC (LON:BHP) has been cut to a 'sell' by analysts at broker Liberum, who see clear signs that iron ore prices are coming off the top.
“While we have been bearish on the iron ore outlook for some time now, we have awaited clear short-term signals before downgrading BHP. The Restocking Indicator moved to a clear ‘sell’ signal for July.
“This, together with other key indicators (Brazil/Aus weekly shipments, mill profitability, scrap etc) prompts us to go short.”
Even the prospect of record dividends this year is unlikely to drive the shares higher, said the broker.
Explaining its downgrade, Liberum said the steel restocking Indicator has moved to a sell signal for the first time since January as both the book to build ratio and inventory ratio from the Chinese steel PMI significantly worsen.
This is the weakest signal since 2015, with the exception of the February 2020 reading, it added.
“We can see inventory levels at mills and traders at the top of seasonal ranges and the mills drawing down iron ore inventory levels at ports, as they see weaker demand ahead.”
BHP shares eased slightly to 2140.5p.