Rio Tinto Shares Downgraded as CEO Stepping Down, Macro Headwinds Cause Uncertainty

Jefferies revealed in a note to clients on Monday that it has downgraded Rio Tinto (LON: RIO) to Hold from Buy, citing uncertainty surrounding the company’s leadership and macroeconomic headwinds.

The broker also cut its price target for the mining group to 4,600p from 5,700p a share. 

The stock fell around 0.5% on Monday and is down over 1.8% so far in Tuesday’s session, adding to its recent losses. In the last three months, Rio Tinto’s shares have declined by over 10%.

The downgrade by Jefferies follows Rio Tinto’s recent announcement that Chief Executive Jakob Stausholm will step down later this year after around four years in the role. 

While the company said it is continuing with its current strategy, Jefferies noted that the leadership transition introduces questions about Rio’s future strategic direction.

In addition to the leadership change, the firm pointed to a weakening near-term outlook for iron ore. 

Although Jefferies said it is not bearish on the commodity longer term, it cited rising US-China trade tensions, continued softness in China’s property market, and structural cuts to Chinese steel production as likely to weigh on iron ore prices. 

They add that seasonal factors could also apply downward pressure.

Stausholm, who joined Rio in 2018 and became CEO in 2021, led the company through a strategy reset aligned with the energy transition and long-term growth. He will continue to lead Rio Tinto until a successor is identified.