Rio Tinto and BHP face iron ore inventory warning as prices recover from Chinese New Year lows Proactive uses images sourced from Shutterstock

UBS rates all major producers Neutral as Chinese port stockpiles hit their highest level in more than three years

Iron ore prices have recovered to around $105 per tonne after sliding to roughly $96 during the Chinese New Year period, but UBS has flagged a significant supply overhang that could weigh on the majors, including London-listed Rio Tinto Ltd (LSE:RIO, ASX:RIO, OTC:RTNTF) and BHP Group Ltd (LSE:BHP, ASX:BHP).

Chinese port inventories have climbed to approximately 163 million tonnes, up 19 million tonnes year-on-year and the highest level in more than three years, a build that UBS describes as a key risk to the price recovery.

Rio Tinto, the FTSE 100 mining company, saw its Pilbara earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne improve by $2 in the second half of 2025, recovering from cyclone disruptions earlier in the year, but UBS singled out its cash costs as a vulnerability.

Rio's C1 cash cost of $23.80 per tonne is around $5 per tonne higher than both BHP and Fortescue, which UBS described as a key opportunity for the miner's new management team to address.

BHP, which also has a primary London listing, was identified as the highest-margin producer in the group, with an EBITDA margin of 63% and EBITDA per tonne of $58 in the second half of 2025.

Anglo American's iron ore assets, Kumba Iron Ore in South Africa and Minas Rio in Brazil, delivered stable EBITDA per tonne despite depressed high-grade and lump premiums.

UBS carries 'neutral' ratings on Rio Tinto, BHP, Vale and Fortescue, and a Sell on Kumba Iron Ore, citing spot 2026 free cash flow yields of 10% for Rio, 9% for Vale and 5% for BHP.

China's steel production fell 14% year-on-year in January on official data, though blast furnace utilisation rates remain stable at around 86%.