Berenberg downgrades Rio Tinto; Glencore retains top diversified pick

Investing.com -- Berenberg has downgraded Rio Tinto (NYSE:RIO) to a “hold” rating from “buy,” lowering its price target to GBp 4,700 from GBp 6,200. 

The downgrade follows a more cautious outlook on iron ore, as the firm cut its 2025 price forecast by 3.1% to USD95/t and reduced 2026–27 estimates by around 5.5%. 

Analysts cited a lack of clear Chinese economic stimulus and the anticipated supply increase from Guinea’s Simandou project as key drivers.

Rio Tinto’s strategic direction was also brought into question following the unexpected resignation of CEO Jakob Stausholm. 

Berenberg flagged market speculation linking the move to internal disagreements over a possible merger with Glencore (OTC:GLNCY). 

The brokerage noted that if such a deal were to happen, Glencore would be the likely beneficiary. In addition, Rio’s exposure to weak lithium prices and potential headwinds from Canadian aluminium tariffs further contributed to the downgrade. 

Despite a yield of approximately 5% and trading at 0.82x NAV, Berenberg sees limited upside catalysts in the absence of new Chinese stimulus.

Glencore remains Berenberg’s favored diversified miner, with a maintained “buy” rating, though its price target was cut to GBp 330 from GBp 380. 

The brokerage adjusted its forecasts downward primarily due to weaker thermal coal pricing, with the 2025 estimate lowered by 10% to USD109/t. 

Despite these downgrades, analysts see upside potential from multiple sources, including a possible sale of Kazzinc, shareholder returns following the close of the Bunge (NYSE:BG) deal, and a recovery in metallurgical coal and copper prices.

Glencore’s marketing segment has underperformed, and no significant self-help measures have been implemented. However, the company’s net debt is expected to ease in H2 2025, aided by proceeds from the Bunge transaction. Berenberg noted the potential for a USD1bn buyback or special dividend. 

The company’s shares trade at 0.86x NAV and yield around 2%, with a 13% upside to the new price target.

For comparison, Berenberg holds a “hold” rating on BHP with a price target of GBp 1,700, down from GBp 1,900, and a “sell” on Anglo American (JO:AGLJ) with a target of GBp 1,900. 

Among diversified miners, Glencore was described as “the best of a fairly bad bunch” in terms of upside potential.