Why did the Rio Tinto share price (ASX:RIO) have such a lousy 2021?

Worker in hard hat looks puzzled with one hand on chin

The Rio Tinto Limited (ASX: RIO) share price came crashing down in 2021, despite a positive start to the year.

The mining company’s share price fell from $113.83 to $100.11 during the year, shedding 12%. In comparison, the S&P/ASX 200 Index (ASX: XJO) gained around 13%.

Let’s examine what may have impacted this ASX 200 share in 2021.

Iron ore prices

The Rio Tinto share price recorded gains in the first half of the year before collapsing from August to November. The company’s share price then picked up in late November to finish the year off in style.

In the first six months of the year, Rio Tinto shares gained nearly 12%. Shares in the mining giant climbed 15% between market close on 5 February and 25 February. Strong iron ore prices, a record dividend payout from the company, and positive financial results all weighed positively with investors.

The company reported a 3% increase in sales revenue to US$44,611 million and a 13.4% boost in iron revenue. Rio Tinto also rewarded shareholders by declaring a fully franked final dividend of US$4.02 (A$5.19) per share.

March to May also saw the company’s share price explode on the back of record iron ore prices and well-received first-quarter production results. In the first quarter of FY 2021, the company shipped 77.8 million tonnes of Pilbara iron ore, a 7% increase. Rio Tinto shares surged more than 24% between 22 March and 10 May.

However, from August to November the Rio Tinto share price came crashing down to earth. As Motley Fool Australia noted at the time, investors were selling down the mining company’s shares due to falling iron ore prices.

The company also downgraded its production targets for 2021. A third-quarter trading update in mid-October slightly pushed the share price down, with the Covid-19 virus impacting production results. Between market close on 4 August and 5 November, the Rio Tinto share price dropped 30%. Iron ore prices fell 48% in this same time frame.

Then came the bounce back. The Rio Tinto share price recovered nearly 12% between 18 November and 31 December. The iron ore price increased nearly 31% during this same time period, likely impacting investor sentiment.

The company also announced two major lithium projects. Rio Tinto will acquire the Rincon lithium project in Argentina for $1.15 billion and the Jadar project in Serbia for $3.3 billion.

Rio Tinto share price snapshot

In the past month, the company’s shares have gained around 7%, while they are up 2% this week. At the time of writing, they are trading at $102.23, up 1.74%.

Looking ahead, as my Foolish colleague James reported this week, opinion on the outlook for the company’s share price is divided.

Macquarie Group Ltd (ASX: MQG) has a $135 price target, while Morgans has a hold rating and a $104 price target.

The company has a mammoth market capitalisation of nearly $37 billion based on its current share price.

The post Why did the Rio Tinto share price (ASX:RIO) have such a lousy 2021? appeared first on The Motley Fool Australia.

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More reading

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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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