Some of the world’s biggest iron ore miners were yesterday placed on “credit watch negative” by Standard and Poor’s (S&P), as the price of the commodity continues to plunge amid a supply glut and soft Chinese demand.
The global ratings agency said the credit watch changes were due to a lowering of its iron ore price forecasts to US$45 per tonne for the rest of this year, to US$50 for next year and US$55 for 2017.
The previous forecasts were US$65 for this year and next year, and US$70 for 2017.
The price of the metal, a key ingredient in steelmaking, has fallen by 60 percent over the past 12 months to reach a decade-low of US$47.08 early this month.
The eight iron ore producers being watched by S&P are Anglo-Australian giants BHP Billiton Ltd and Rio Tinto PLC, Brazil’s Vale SA, Australia’s Fortescue Metals Group, Anglo-South African firm Anglo American PLC, Chile’s CAP, Luxembourg-based Eurasian Resources Corp and South Africa’s Exxaro Resources Ltd.
“The revision of our price assumptions and the sharp fall of iron ore spot prices reflect the severe supply and demand imbalance in the market, which we believe could persist for the next two years,” S&P said in a statement.
It added that the lower price forecasts were due to the continued increase in iron ore supply by major miners, softer growth in Chinese demand and higher-cost producers remaining in the market longer than expected.
S&P’s revisions came as Atlas Iron, a West Australian junior miner, said last week it would suspend mining operations “due to recent significant falls in the iron ore price.”
“Despite an extensive cost-cutting program, to which staff and contractors have made significant contributions, the global supply-demand imbalance for iron ore has driven prices down to the point where it is no longer viable for Atlas to continue production,” the company said in a statement.
The world’s four biggest iron ore exporters — BHP Billiton, Rio Tinto, Vale and Fortescue — which make up 70 percent of the market, have ramped up their production to maintain their share of exports, exacerbating the price weakness.
Smaller mining companies such as Atlas, which have higher production costs, have been battling to survive in the challenging conditions.
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