July 2022 is an interesting month to think about the Rio Tinto Limited (ASX: RIO) share price.
It comes after a period of declines for the ASX mining share. At the time of writing, Rio Tinto shares have fallen 17% over the past month to $98.71. Considering the company currently has a market capitalisation of $36 billion according to the ASX, it has lost a lot of value in dollar terms in a short period of time.
For readers that didn't know, Rio Tinto is one of the biggest iron ore miners in the world. To put it in perspective, for the three months to 31 March, Rio Tinto produced 71.7 million tonnes (mt) of iron ore. That's a lot of iron ore. But that number actually represented a 15% year-on-year decline from the first quarter of FY21.
There is more to Rio Tinto's business than just iron, but iron generates the biggest share of earnings. Other commodities in the company's portfolio include bauxite, aluminium, and copper.
What is hurting the Rio Tinto share price?
As a resource business, there are two main elements to revenue generation for Rio Tinto – the quantity of resources produced and the price of that commodity.
Since the beginning of June, the iron ore price has fallen by around US$20 per tonne, representing a fall of around 15%. The copper price also recently reached a 19-month low.
Without a crystal ball, it's hard to know which way commodity prices will go next.
Many resource prices saw strength earlier in 2022, but things have dropped off amid concerns of a global recession, sparked by inflation and rising interest rates.
It is certainly possible that resources like iron ore could see prices rise again, but prices could also drop as well.
What do brokers think?
UBS recently downgraded its price target for Rio Tinto to $98, which is where it thinks the Rio Tinto share price will be in 12 months. It doesn't think the company will earn as much profit over the next few years due to lower commodity prices.
However, the broker Credit Suisse is still optimistic with a price target of $118. That suggests a possible upside of around 20%. However, this price target was recently reduced because of the higher energy expense that the aluminium segment will need to pay.
Credit Suisse does like the aluminium exposure though. It also thinks the company has better avenues to grow over the longer term compared to BHP Group Ltd (ASX: BHP).
Credit Suisse thinks Rio Tinto will pay a grossed-up dividend yield of 20% in FY22 and 18% in FY23.
