The Rio Tinto Limited (ASX: RIO) share price has been well and truly out of form in September.
Since the start of the month, the mining giant’s shares have lost approximately 12% of their value.
Why is the Rio Tinto share price falling?
Investors have been selling down the Rio Tinto share price this month after the iron ore price went into free fall.
This was driven by demand concerns in China following curbs on steel production and fears that property giant Evergrande could collapse. The latter could have a huge impact on Chinese construction and ultimately demand for the steel making ingredient.
And while prices have rebounded in recent days after Evergrande made a bond repayment, the property giant is far from out of the woods.
Where next for its shares?
Unfortunately, one leading broker believes Rio Tinto’s shares could be heading lower from here.
A recent note out of UBS reveals that its analysts have retained their sell rating and cut their price target on the mining giant’s shares by 16% to $86.00.
Based on the current Rio Tinto share price of $98.86, this implies potential downside of 13% over the next 12 months.
UBS made the move following a quicker than expected correction by iron ore prices. This has led to a sharp downgrade to the broker’s iron ore price forecasts, which has led to an equally sharp reduction in its earnings estimates for Rio Tinto.
In addition, the broker has concerns over longer term iron ore prices due to an expected increase in supply from Africa and the availability of scrap steel in China.
All in all, UBS doesn’t believe the Rio Tinto share price has found its bottom just yet and appears to be cautioning investors against jumping in at this point.