Why did the Rio Tinto (ASX:RIO) share price climb today?

Iron ore to the fore once more?

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The Rio Tinto Ltd (ASX: RIO) share price closed higher on Monday, finishing the day up 1.48% to $96.44.

It’s a small but welcome spike for the mining giant which has been swimming in a sea of red over the last three months.

Let’s take a closer look at what happened with Rio’s shares today.

What’s up with the Rio Tinto share price?

Rio shares edged higher despite there being no market-sensitive information for the company today.

In its absence, we have to look to the underlying commodity markets to decipher what forces may be at play.

According to its financial statements, Rio derived over 62% of its revenue in 1H 2021 from iron ore with aluminium sales coming in a distant second at 17%. It also derived 75% of its 1H earnings before interest, tax, depreciation and amortisation (EBITDA) from iron ore.

The price of iron ore fell off the cliff in August amid efforts in China to curb steel production and control carbon emissions.

More than 80% of China’s steel mills suspended production in September for maintenance work. That, coupled with the debt crisis facing Chinese property firms, saw iron ore prices tumble more than 54%, or US$119.5/tonne, from July to the end of September.

However, it has since made a slight recovery, bouncing off its lows of US$103/tonne on 22 September to now trade around 9% higher at US$112/tonne.

Rio is considered a price taker on iron ore, given it is an ASX resource share that produces the commodity. It has no real pricing power in the iron ore markets.

As such, its share price can and does fluctuate with volatility in broader commodity markets and with iron ore in particular.

It’s also worth noting that today’s gains appeared to carry across the wider ASX iron ore and metals’ basket as well.

For instance, the S&P/ASX 300 Metals & Mining Index (XMM) closed 1.34% higher while fellow iron ore heavyweights Fortescue Metals Group Ltd (ASX: FMG) and BHP Group Ltd (ASX: BHP) each ticked into the green today.

Rio Tinto share price snapshot

The Rio Tinto share price has struggled this year to date, having posted a loss of 15% since January 1. This appears to be driven by the decrease in iron ore prices.

As such, it has only climbed 1.09% into the green over the past 12 months.

Each of these results are well behind the S&P/ASX 200 Index (ASX: XJO)’s return of around 21% in that time.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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