At time of writing, the share price of Rio Tinto Ltd [ASX:RIO] is up .53%, trading at $91.08.
Here’s what we talk about today:
- An overview of recent movements in Rio shares
- Highlights from quarterly production results
- Trade deal may happen — but this may not be enough to save company earnings
The Rio share price flew up between December and July as an Aussie iron ore boom got underway following a disaster at a Vale SA mine in Brazil.
The Rio share price has since tumbled from its 52-week high of $106.92 on 28 May, going as low as $82.38 on 26 August.
This represents a 23% loss and was driven by weak data out of China as the trade war rumbled on.
It has since recovered, seeing a bullish crossover of its 20- and 50-day moving averages on 26 September followed by a retracement and another surge:
Highlights from Rio Tinto quarterly production results
- Pilbara iron ore shipments of $86.1 million tonnes up 5% on the third quarter last year
- Copper production of 158 thousand tonnes down 1% on pcp, 15% higher than second quarter
- Oyu Tolgoi underground project on track for commissioning this month
- Guidance unchanged except for bauxite and aluminium, which are down to 54 million tonnes and 7.7 tonnes respectively. This represents guidance cuts of around 4% and 6%.
- 62% higher exploration and evaluation spend
The iron ore price chart (63.5% Tianjin fines) looks a lot like the Rio share price chart:
This makes sense as iron ore is Rio Tinto’s primary project.
Free report details three potential resource plays for investors who want to shift their money away from the major iron ore miners…and why now may be the time to do so. Download your copy by clicking here.
Latest trade deal may point to upside for Rio Tinto share price outlook (but beware)
The latest whispers out of the US–China trade deal appear to be pointing to a resolution some time before the 2020 US election.
After all, President Trump likely wants to ‘bring home the elk’. I.e. have a major foreign affairs trophy to present to voters as proof of his credentials.
China has clearly been hurt by the tariffs — despite crowing from various groups of economists that they would have no impact.
It shows up in the steep fall of the Caixin China General Composite PMI between March and June of this year:
It has since recovered as reserve requirement ratio cuts have released extra liquidity into their economy.
But here’s the rub.
The Chinese household debt to income ratio is now higher than Germany and on par with the US and Japan, standing at 92%.
Their growth is funded by debt — and at some point a correction could be in the offing.
And when it does, their growth could slip below consensus 6% — having wide ranging impacts across a variety of industries.
This includes the steel manufacturing sector in China, which is closely tied to Rio Tinto’s earnings.
For a more detailed look at forecasts for the iron ore price, be sure to check out our in-depth look at Chinese demand, Australian supply, and global growth factors in our free report on the topic. The implications for the Rio share price might come as a surprise. It also includes three different alternative investments. Download it for free here.
For The Rum Rebellion