So far in 2015 shares of iron ore giant Rio Tinto Limited (ASX: RIO) have handily outperformed the S&P/ASX200 (ASX: XJO) (Index: ^AXJO), up 11.7% and 9.6%, respectively.
This is despite the likelihood of further price falls in key commodities and the announcement of its worst half-year profit in 24 months.
Unfortunately the worst could be yet to come.
BHP Billiton Limited (ASX: BHP), Brazil's Vale and Rio are all significantly increasing iron ore supply – Rio's most profitable commodity by a long way – at a time when demand from China (which accounts for two thirds of global steel production) is waning.
Then there's the fall in copper and coal prices, another two major commodities for Rio. Whilst Aluminium prices are providing some relief, it's not going to be anywhere near enough to offset the falls in its other commodities.
So although Rio's management has promised material returns to shareholders (it's currently conducting a share buyback) and its valuation looks undemanding, with shares trading on a price-earnings ratio of just 11 and dividend yield of 4.2%, investors would be wise to avoid Rio shares, for now.