Credit Suisse shifts preference to Rio Tinto from BHP Billiton

(ShareCast News) - Credit Suisse upgraded Rio Tinto to 'outperform' from 'neutral' and raised its price target to 3600p from 2750p, while simultaneously bumping down BHP Billiton to 'neutral' from 'outperform' with its price target raised to 1380p from 1300p.Looking into 2017, the bank have switched their stock preference from rival miner BHP Billiton to Rio Tinto due to vanishing iron ore surpluses as steel production rises and supply growth declines, attractive valuation and the miner's balance sheet strength enabling additional shareholder returns.The analysts also expect iron ore prices to drop from $80 per tonne to $65/t in the first quarter of 2017 at an average $55 for the full year then falling to $53 in 2018.Forecasts for underlying earnings before interest tax depreciation and amortisation (EBITDA) have been revised up 46% in 2017 and up 51% in 2018."In the last year we have preferred BHP over Rio given its commodity mix. However, with an improvement in laggard commodities like thermal coal and copper, and with iron ore exhibiting less downside risk versus coking coal for BHP, we believe Rio now has the better earnings outlook for the year ahead and will be in a position to consider additional shareholder return before BHP."The bank also downgraded miners Kaz Minerals and Ferrexpo in a separate note. Kaz Minerals was downgraded to 'neutral' from 'underperform' and its price target was raised to 370p from 275p while Ferrexpo was downgraded to 'underperform' from 'neutral' and its price target was raised to 120p from 60p.Rio Tinto's share price rose 4.19% to 3,148p at 1000 GMT on Wednesday.