Why is Rio Tinto stock declining 35% as iron ore prices plummet?

iron ore

According to state officials, (NYSE: RIO) has lost more than 11% of its value in the previous month and is now trading at $76 per share.

The stock’s recent slide has been fueled by a dramatic reduction in global iron ore prices. During the beginning of September 2021, the price of iron ore per dry metric tonne dropped more than 35% from more than $220 in July 2021 to less than $145, mainly because China lowered steel production in order to meet carbon emission standards. Because the Chinese steel sector accounts for 15% of the country’s total carbon emissions, China asked 20 steel mills in Tangshan city to shut down for a week in August to reduce emissions.

The amount of iron ore imported by China for July 2021 decreased from 89.41 million metric tonnes in June. This was a significant decrease from the 102.1 million metric tonnes recorded in March 2021.

The demand for the primary raw material – iron ore – from China has been badly harmed due to attempts to curb steel output, resulting in a steep decline in price levels. However, in August 2021, Chinese iron ore imports totaled 97.5 million metric tonnes, indicating a small comeback.

A Trefis Machine Learning Engine based on more than a decade of stock price data, predicts that RIO stock will increase by more than 7% in the next three months (63 trading days), following an 11 percent loss in the previous one month (21 trading days).

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Over the next three months, the stock has a greater than 70% chance of gaining. However, how do these figures vary based on whether you hold RIO shares for a short or long period? If the stock rose following a decline in the RIO stock, you could test this and many more combinations on the Trefis Machine Learning Engine. It is possible to calculate the probability of recovery over time intervals including a quarter, a month, or even one day.

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