The Rio Tinto Limited (ASX: RIO) share price is collapsing. Under pressure from falls in key commodities like iron ore, coal, copper and gold, the $86 billion miner's share price has lost 17.5% since the beginning of the year.
Unfortunately, it's showing no sign of slowing down.
After staging a brief rally, Rio Tinto's share price has fallen 10% over the past month, on the back of continued falls in iron ore, aluminium, coal and gold. The price of iron ore, Rio's most lucrative commodity, has now dropped from over $US185 per tonne in 2011 to below $US45 per tonne overnight.
While Rio Tinto's breakeven prices are some of – if not 'the' – lowest in the world, falling market prices will cripple profit margins and likely take the company's share price lower.
Lower market prices are a result of China's transition away from infrastructure investment towards consumption and a significant oversupply in the global steel market. It's showing no sign of abating in the foreseeable future.
Buy, Hold or Sell?
Despite falling heavily over the past few years, I'm reluctant to believe Rio's woes are over. I think the commodity glut could get worse before it gets better and there'd be no reason to rush out and buy shares of Rio, BHP Billiton Limited (ASX: BHP) or Fortescue Metals Group Limited (ASX: FMG) at this time.
Indeed, there are plenty of other, faster-growing, dividend stocks available on the ASX (such as the one below) at much more compelling prices.
