Rio Tinto Ltd (ASX: RIO) shares are up 2% in afternoon trade on Thursday.
Shares in the S&P/ASX 200 Index (ASX: XJO) iron ore miner closed yesterday trading for $113.39. At time of writing shares are changing hands for $115.61.
For some context, the ASX 200 is up 0.5% at this same time. And in a better apple to apples comparison, the S&P/ASX 200 Resource Index (ASX: XJR) is up 1.1%.
That's today's price action for you.
Now, here's why this top broker just upgraded Rio Tinto shares to an 'overweight' rating.
Why did the ASX 200 miner get upgraded?
JP Morgan has had a rethink about its iron ore price forecast.
As The Australian reports, the broker increased its forecast for the price of the industrial metal by 13% for 2024 to US$110 per tonne. JP Morgan also boosted its forecast price by 17% for 2025 to US$105 per tonne.
Indeed, iron ore had been defying a series of bearish forecasts and is currently trading for just under US$120 per tonne.
According to JP Morgan's metals and mining analyst Lyndon Fagan:
As 2023 comes to a close, iron ore prices look well supported on the back of resilient Chinese steel production, port restocking, recent policy easing, and our view that China steel cuts will be aggressively implemented.
As for Rio Tinto, Fagan said, "The iron ore miners are our preferred sub-sector within the Aussie Metals & Mining space, with investor positioning underweight, a likely consensus earnings upgrade cycle coming, and valuations looking undemanding."
JP Morgan has a June 2024 price target of $116 for Rio Tinto shares. That's only 0.3% above the current share price. But then Rio Tinto stock also trades on a fully franked trailing yield of 5.1%.
How have Rio Tinto shares been tracking?
Rio Tinto shares are up 22% over the past 12 months. That figure doesn't include the ASX 200 miner's dividend payouts.