The Rio Tinto Limited (ASX: RIO) share price sunk below $88 during November. But since then, it has started rising. Is this the beginning of a recovery?
In the first ten days of last month, Rio Tinto shares fell by 3%. But between then and the end of the month, it actually rose by around 7%. Could this be the start of a recovery?
The Rio Tinto share price remains around 30% lower than it was in early August as the iron ore price has dropped significantly since then.
In the last few months there has been concerns about how much demand there is for iron ore. A while ago, it was reported that Chinese officials were telling steel mills to slow down production. The Chinese property developer market has also seemed to be on wobbly ground, with global headlines pointing to Evergrande's woes multiple times.
The world started contending with the prospect of the dangers of the Omicron COVID-19 variant in November 2021.
But could the momentum of the Rio Tinto share price continue from here?
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Positive speculation about Chinese steel mills
Earlier this week, the Australian Financial Review reported on speculation that Chinese steel mills are preparing for an easing of production cuts, perhaps just weeks away. The iron ore price rose to US$103 in response to that possibility.
Chinese research group MySteel reportedly said that China's steel mills are restocking with a potential restart of idled plants in December. MySteel said it expects pig iron production – iron that has been put in a blast furnace to be used for steel or other uses – to rise by 37,000 tonnes per day by the end of the year.
Higher demand for iron ore could support the iron price, which in turn could help profit for the ASX miner and the Rio Tinto share price.
Vale downgrades production
Vale, one of the world's biggest iron ore miners, recently downgraded how much iron ore it expects to produce this year.
It announced a reduction from the previous production guidance range of 315mt to 335mt to the lower range of 315mt to 320mt.
The 2022 production guidance was also reduced to a range of between 320mt to 335mt.
Vale told investors that it wanted to protect its profit margins over production volume, therefore it is holding back shipments of lower-quality ore.
Is the Rio Tinto share price good value today?
Brokers are mixed on Rio Tinto.
For example, UBS still rates Rio Tino as a sell, with a price target of $79 because of the seeming vulnerable conditions for the iron ore price.
However, at the opposite end of this are the analysts at Macquarie Group Ltd which rates the Rio Tinto share price as a buy with a price target of $133 because there is still ongoing decent demand for iron ore.
