Two analyst downgrades take big chunk out of Rio Tinto shares as iron prices set to drop

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The collapse of the Brumadinho dam sent iron ore prices soaring (Source: Getty)

Rio Tinto weighed on the London exchange today after the miner was hit by two analyst downgrades in two days, wiping around £4bn off its market value.


Shares dropped around 7.6 per cent in the mid afternoon to 4,137p as Societe Generale advised investors to sell their shares in the iron miner.

Read more: Iron ore prices soar as Chinese investors fear Vale output cut

It came as a double-whammy a day after Swiss bank UBS cuts its rating to neutral from buy, warning that iron ore prices - which have pushed up Rio Tinto’s shares by 21 per cent so far this year - will reverse some of their gains.

“We expect the spot iron ore price to fall over the next six months with disruption in Brazil likely to have only a short-term impact on the market given the limited demand growth and offset from inventory, scrap & latent capacity,” analyst Myles Allsop said.


Allsop added this would cap the share price, “especially given the long-term concerns over China property demand.”

Rio Tinto declined to comment.

Iron ore prices have soared 16 per cent since the beginning of the year as part of the fallout from the Brazilian dam disaster.

Read more: Rio Tinto rewards shareholders with $4bn special dividend

Over 300 people are missing or dead after a dam storing mining waste burst in January, releasing a wave onto local workers.

The disaster forced the dam’s operator Vale, the world’s largest iron miner, to cut iron ore output by ten per cent.