Berenberg has cut its price target and recommendation for mining giant Rio Tinto, saying the steel outlook in China has worsened which bodes ill for the iron ore price.
A downbeat production update earlier this week is another reason for the downgrade, though Berenberg primarily focuses on statements from the Chinese government that steel production will be curtailed alongside comments about weak demand from the country’s trade body.
Supply is tight but this easing on the demand side might mean the recent rise in iron ore prices has peaked suggests the broker.
A' hold' is its new recommendation with a price target of 6,500p, with advice also to switch into Anglo American which derives 26% of its revenue from China versus Rio’s 57%.
Shares in Rio today were down 2.3% today at 5,715p.