Barclays downgrades European miners to 'neutral' on China steel output cuts

Analysts at Barclays downgraded their stance for European miners to 'neutral' given China's "rapid" steel production cuts and the likelihood that they might extend into 2022 and beyond in order to limit industry emissions.

Combined with slowing demand and given the medium-term projections for supply growth, Beijing's latest measures had led Barclays to reset its price deck for iron ore lower - leaving iron ore earnings on the cusp of mark-to-market downgrades.

Glencore remained their highest conviction 'overweight' in the space, with the analysts pointing to what they termed was an "attractive" valuation and naming it as their 'top pick'.

The commodity trader's shares were changing hands on free cash flow yield of 28% and a price-to-earnings multiple of 3.9.

Barclays also specifically pointed out Glencore's earnings momentum and cash returns.

On the other hand, they downgraded their recommendation on BHP to 'equalweight' reflecting its "strong" relative performance, premium valuation and now greater exposure to iron ore than Rio Tinto.