Global credit agency Standard & Poor’s said it saw little improvement in iron ore prices in the near-term and warned that smaller single-commodity miners could see their ratings slip.
S&P said a slowdown in China, the world’s largest producer and consumer of steel, and sluggishness in Europe had seen iron ore prices dive from their peak of more than US$180 per tonne to below US$90 per tonne in the past two months.
Prices had rebounded to between US$100-110 but S&P said it “doesn’t expect iron ore prices to climb much further in the near term”, and warned that ”substantially debt-laden” miners could come under pressure.
“We found that iron ore prices need to average above US$120 per tonne in the near term to alleviate potential negative rating pressure for certain producers, assuming other factors such as costs and foreign exchange rates remain the same,” S&P said in a research note.
The agency said single-commodity miners such as Australia’s Fortescue Metals Group and Ukraine’s Ferrexpo would be under the greatest pressure, with iron ore accounting for almost all their business.
Fortescue last month secured a US$4.5 billion loan to pay down debts that have seen it defer two planned expansions and cut jobs as it grapples with a commodities slowdown.
