Rio Tinto PLC (LSE:RIO) was downgraded by Barclays to 'underweight' in spite of the mining bull market, as Chinese steel production is expected to reverse course in the second half of the year.
A cut in Chinese steel production does not bode well for iron ore demand, with the FTSE 100 group being one of the world's largest producers.
Barclays made the call after speaking with Chinese steel mills over the past week.
"This reflects the fact steelmakers are making minimal profits currently. We expect Chinese steel prices to fall in the absence of cuts, due to sluggish real estate demand... and seasonally elevated steel inventories."
The analysts expect steel production to decline from June onwards, similar to in 2021, with Chinese production forecast to decline 3% year-over-year in 2022, having previously been expected to be flat.