After dropping 7% in a month, can the Rio Tinto share price stage a comeback in May?

One of the biggest influencers on the Rio Tinto share price can be the iron ore price.

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Key points

  • The Rio Tinto share price dropped 7% in April 2022
  • The ASX mining company revealed a 6% year-on-year decline at its Pilbara iron ore mine
  • Some brokers think the miner is a buy because of the iron ore price

The Rio Tinto Limited (ASX: RIO) share price fell by 7% in April. What could happen in May 2022?

Well, at the time of writing, it’s down another 1% since the beginning of the month.

The company reported its 2022 first-quarter production numbers a couple of weeks ago. So, let’s look at what the company announced.

Rio Tinto’s first quarter

The ASX mining company revealed that Pilbara iron ore production was 71.7mt for the quarter. That represented a decline of 6% year on year and a 15% decline quarter on quarter.

Year on year, Rio Tinto’s bauxite production was flat at 13.6mt, aluminium production was down 8% to 736kt, mined copper was up 4% to 125kt, titanium dioxide slag production was down 2% to 273kt, and Iron Ore Canada (IOC) iron ore pellets and concentrate production was up 3% to 2.4mt.

Rio Tinto admitted that the first quarter was “challenging”. It said that “ongoing mine depletion was not offset by mine replacement projects, with delayed commissioning of Gudai-Darri“. Gudai-Darri’s first ore is still forecast for the second quarter of 2022.

The ASX mining share also blamed ongoing commissioning challenges at the Mesa A wet plant that continue to impact the production ramp-up at Robe Valley.

However, the full-year shipment guidance remained unchanged.

Comments on the iron ore market

One of the biggest influencers on the Rio Tinto share price can be the iron ore price.

The mining giant said that iron ore prices had been volatile since the start of the year, with the Platts 62% Fe index up 33% to US$158 per dry metric at the end of the first quarter.

Rio Tinto said that since February 2022, “supply concerns due to the war in Ukraine has outweighed muted demand growth and a crackdown on speculative trading behaviour in China. China’s economy is getting a boost with infrastructure spending, but COVID-19 lockdowns pose downside risks to near-term construction activity.”

The miner is expecting commodity demand to be underpinned by the global energy transition, which is creating new demand for its production and near-term Chinese policies that “are becoming more growth focused.”

However, Rio Tinto noted that rising interest rates globally pose risks to economic growth. Other risks include a prolonged war and other geopolitical tensions, and extended labour and supply shortages.

What is the outlook for the Rio Tinto share price?

No one can know what a share price is actually going to do, but analysts have a guess where they think share prices will be in 12 months from now.

Some brokers are confident on Rio Tinto shares. The broker Macquarie rates Rio Tinto as a buy, with a price target of $140. That’s a potential upside of around 25%. It’s optimistic because of the performance of the iron ore price.

Citi is another broker that rates it as a buy, with a price target of $135. Citi is also confident because of the strong iron ore price.

However, UBS is only neutral on the Rio Tinto share price. The price target is $104, implying a possible decline of 7%. It thinks it will need a good performance over the rest of the year to meet the guidance.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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