Rio Tinto Ltd (ASX: RIO) shares have seen enormous volatility in 2024 to date. Overall, the Rio Tinto share price has declined 13% this year. It's interesting to consider whether the ASX mining share is going to have a better 2025 and how big the dividend yield could be.
As shown on the chart above, the company has been much higher and much lower than today during this year.
The volatility of actual demand for commodities and changes to expectations have shifted over the year with China's economy and stimulus.
Let's look at the latest from the Asian powerhouse related to iron ore and potentially other commodities.
Unnamed stimulus
Trading Economics notes that the iron ore price is currently around US$105 per tonne after "disappointing" signals from China. That's because China's annual economic planning conference, led by President Xi Jinping, has underlined its desire to boost the economy with stimulus, but it didn't provide much detail on the potential size of stimulus measures.
China noted it has plans for proactive fiscal policy and moderately looser monetary policy, including increasing the deficit, issuing more ultra-long-term bonds next year, and lowering interest rates.
Trading Economics also noted that commodity prices have come under pressure as the market reduced expectations of how much the Federal Reserve will cut rates in 2025.
UBS thinks iron ore will be around US$100 per tonne in 2025, US$95 per tonne in 2026, and US$90 per tonne in 2027 as a market surplus builds. This could influence Rio Tinto shares.
The broker is bullish on copper, suggesting the copper price could reach US$5 per pound in 2026. UBS also suggested lithium is through the worst of it, with demand growing by 18% year over year and supply growing by 15% year over year. UBS believes the surplus will "draw down" by 2027-2028.
UBS also said:
The outlook for commodities has deteriorated since November (and major commodities have all retraced) on concerns that Trump's proposed tariffs will drive lower global growth and a stronger US dollar. China's stimulus has/will continue to underwhelm in our view and there is significant uncertainty on the impact of the tariffs and magnitude of China stimulus going into 2025. As a result, we think it is too early to turn positive on all industrial commodities. We prefer commodities which are underpinned by compelling supply dynamics, including copper and aluminium, as well as gold which benefits from lower real rates and geopolitical uncertainty.
Projections for Rio Tinto shares
Let's look at what the broker is expecting from Rio Tinto in FY25.
UBS predicts Rio Tinto could make US$51.5 billion in revenue, US$17.3 billion in operating profit (EBIT) and US$12 billion in net profit after tax (NPAT). It's also projected that owners of Rio Tinto shares could pay a dividend per share of US$4.42.
That means the Rio Tinto grossed-up dividend yield could be 8.4%, including franking credits.
UBS has a price target of $124, which implies a possible rise of 4.6% within the next 12 months.
