Rio Tinto Shares Will Struggle to Re-Rate, Says Analyst

Rio Tinto (LON: RIO) shares may continue to underperform despite an apparently cheap valuation, according to Berenberg, which downgraded the mining group from Buy to Hold and lowered its price target to 4,700p from 6,200p a share.

Despite a recent bounce, Rio Tinto shares are down around 10.7% this year. They currently trade around the 4,268.5p mark.

Berenberg said Rio's stock has been drifting lower in 2025 and now faces several headwinds that could prevent a re-rating in the near term. 

Chief among these is the outlook for iron ore, which makes up 61% of Rio's projected 2025 EBITDA. 

The broker warned that iron ore prices are unlikely to recover meaningfully in the second half of the year without major stimulus from China, and may come under pressure due to increasing supply from projects such as Simandou in Guinea.

The analyst also flagged concerns around Rio’s recent acquisition of Arcadium Lithium, calling it a “sensible counter-cyclical move” but warning that persistently weak lithium prices could be “a financial drag on Rio’s results for some time.”

The unexpected departure of CEO Jakob Stausholm adds further uncertainty. Berenberg noted that speculation around a potential merger with Glencore is unlikely to favour Rio shareholders.

With few near-term catalysts and a dividend exceeding free cash flow, Berenberg believes Rio’s shares “will struggle to rerate” and has shifted to a more cautious stance.