Down 19% since June, where to next for the Rio Tinto share price?

Are Rio shares set for a recovery in a changing macro environment?

| More on:
Miner standing in front of a vehicle at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • China's property crisis and economic slowdown have spooked investors and put pressure on materials shares
  • But one expert believes Australian exporters' reliance on China exists more in our imagination and not in reality
  • Australia's exports are up 30.3% year over year, while exports to China are down 11.3%

The Rio Tinto Limited (ASX: RIO) share price has taken a plunge over the past few months, losing almost 19% since 1 June.

Rio shares started June at $114.91 apiece and are currently trading for $93.24 a share.

Meantime, the S&P/ASX 200 Materials Index (ASX: XMJ) has also taken a hit over the same timeframe, losing around 13%.

But there are some perspectives and new developments to consider that may put this performance in a new light. Let's take a look.

What's happening in China?

There is a glimmer of optimism that China's property crisis woes could be beginning to ease, as reported by my Fool colleague Monica.

It's been reported China is stepping up its support for its housing industry and easing some restrictions in its ongoing zero-COVID policies.

In a research note on Friday, ANZ head of Australian economics David Plank said easing curfews in the city of Chengdu have aided the demand outlook for iron ore.

On the same day, Morgan Stanley also sharpened its outlook for aluminium. The broker lifted its forecast for the aluminium price by 17% to US$2,525 per tonne.

This followed speculation of widespread cuts to aluminium production in China due to the nation's soaring energy costs.

The importance of the Chinese market?

However, one analyst says that Australia's — and Rio Tinto's — dependence on China could be an artefact of our biases and memories rather than fact.

Fisher Investments founder Ken Fisher notes that Australia's exports to China are down 11.3% year over year despite Australia's net exports growing 30.3%.

He largely attributes this to the growth in Australian exports to developed and emerging economies such as South Korea and India, as reported by The Australian.

Fisher also provided further analysis on Australia's perceived over-reliance on China.

What did Fisher say?

Fisher noted that China's explosive growth over the past decades may have reached a point of diminishing returns, with towns and cities now more interconnected than at any time before.

He argued that laying down the provisional infrastructure allowed the Chinese economy to boom by unifying conduits of its industry. However, now that phase of meteoric growth is over, he expects it to taper off to levels seen by more developed economies.

China's gross domestic product (GDP) is expected to grow by 3.9% in 2022 — a far cry from its peak of 14.2% in 2007.

Fisher noted that ongoing China slowdown fears could be overblown, stating "Australia isn't a one-trick export pony dependent on Chinese commodity binge".

He said part of why people assume China is central to the health of the Australian economy and exporters is that during the Global Financial Crisis, China was still developing rapidly and its demand for raw materials is what kept Australia's head above water while other economies floundered.

But, Fisher said, times have changed and there has been a long-term correlation between China's GDP falling and the S&P/ASX 200 Index (ASX: XJO) rising:

History shows slowing Chinese growth itself doesn't doom the ASX. After China's GDP growth peaked at 14.2 per cent in 2007, it slowed in 10 of the next 12 years before the ensuing Covid-19 skew. The ASX 200 rose in nine of those 12 years, climbing 150.5 per cent – topping world stocks' 132.8 per cent.

Driving the point home, Fisher concluded:

Inflated China fears have stalked Australian stocks for years. But remember: False fears are bullish, always and everywhere. So is depressed sentiment. Don't let today's gloomy headlines scare you from the coming recovery.

Rio Tinto share price snapshot

The Rio Tinto share price is down 6.9% year to date and 5.7% over the last 12 months.

This compares with the ASX 200's near 10% drop in 2022 so far and 9% loss in the past year.

Rio's current market capitalisation is roughly $34.6 billion.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Matthew Farley 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Rio Tinto share price tumbles on CEO bombshell news

The mining giant is now looking for a new leader.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

What's going on with the Fortescue share price today?

This mining giant is making changes to its leadership.

Read more »

Happy construction worker at a building site with a group of workers at the background.
Materials Shares

After its result, does Macquarie rate James Hardie shares a buy, hold or sell?

The company announced its FY25 earnings on Wednesday.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Fortescue shares fall on Iron Bridge blow

Iron Bridge is taking longer to ramp up than planned.

Read more »

Three miners looking at a tablet.
Materials Shares

Buy Rio Tinto shares for a 23% return

Let's see which broker is tipping this mining giant as a top buy.

Read more »

A bricklayer peers over the top of a brick wall he is laying with a level measuring tool on top and looks critically at the work he is carrying out.
Materials Shares

Brickworks shares have surged 15% in a month. Are they still good value according to Macquarie?

Here's what this broker has to say about the stock.

Read more »

A man checks his phone next to an electric vehicle charging station with his electric vehicle parked in the charging bay.
Materials Shares

Are Pilbara Minerals shares too cheap to ignore?

A leading broker has given its verdict on this beaten down lithium miner.

Read more »

An unhappy man in a suit sits at his desk with his arms crossed staring at his laptop screen as the PointsBet share price falls
Materials Shares

Does Macquarie rate James Hardie shares a buy, hold or sell?

The company is set to report FY25 earnings this week.

Read more »