Rio Tinto (LON: RIO) share price has come under pressure in the past few months as most of its key metals have struggled. The stock, one of the most important ones in the FTSE 100, has dropped to 4,919p, down by over 13% from its highest point this year. This means that it has moved into a correction.
Iron ore, aluminium, and copper pricesRio Tinto is one of the biggest mining companies in the world. Like other top players in the industry, the company does well when these commodities are rising.
Recently, however, most metals that it mines have dropped sharply amid rising concerns about the Chinese economy.
The price of iron ore has plunged and is now approaching the $100 mark. This is happening because of the strong inventories in China and the fact that many factories are slashing their orders.
The performance of iron ore is a sign that China’s economy is not doing well as the housing sector goes through a turmoil. Banks and local governments are also going through a significant strain.
Iron ore is an important part of Rio Tinto’s business. The most recent results show that the company produced 331.5 tons of iron ore in 2023, bringing in over $32.2 billion in revenue and $20 billion in EBITDA. That was an improvement from the previous year’s $30.9 billion and $18.6 billion.
Iron ore is not the only metal that is under pressure. The price of aluminium has also moved sideways in the past few months. This happened as China’s construction and manufacturing output continued falling.
Rio Tinto’s aluminium business struggled in 2023 as its revenue and EBITDA dropped to $12.3 billion and $2.3 billion, respectively.
Copper has also not lived up to its expectations. For a long time, the view has been that copper price would surge as the industry moved into a deficit. However, the price has remained in a tight range and is about 10% below its highest point in 2023.
This means that its copper business may continue struggling this year as it did in 2023 when its EBITDA dropped to $1.9 billion from the previous year’s $2.6 billion.
The other challenge is that its minerals business is also not doing well as battery metals like lithium and nickel have struggled amid woes in the EV industry.
Therefore, Rio Tinto will likely implement measures to improve its profitability. This could include some layoffs in some of its top embattled metals. It also means that the company will likely not boost its dividend after it slashed it in February.
Rio Tinto share price forecast
Turning to the weekly chart, we see that the Rio Tinto stock price found a strong resistance at 72.23p. It has struggled to move above that level four times since May 10th of 2021. The stock has now dropped and moved to the 100-week moving average.
It has also remained above the ascending trendline, which connects the lowest swings since March 2020. The two lines of the MACD indicator have formed a bearish crossover. Therefore, more downside will be confirmed if the price moves below the ascending trendline. If this happens, the next point to watch will be at 50p.
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