20-10-2014, 11:09 PM
Miners face downgrade after Moody’s lowers iron ore expectations
THE AUSTRALIAN OCTOBER 21, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
MOODY’S Investors Service could downgrade its credit ratings on Australia’s more marginal iron ore producers in the coming weeks after the ratings agency slashed its price expectations.
Moody’s is now modelling for iron ore to range between $US75 and $US85 a tonne through 2016, down from its previous expectations of a range of $US95-$US105 a tonne.
Any downgrades from the ratings agency could hasten equity raisings among the higher-cost producers struggling to repay debts after a 40 per cent fall in iron ore prices this year.
The deep cut to expectations reflects a continued surge in supply and “muted growth” in global steel production.
Moody’s senior analyst Matthew Moore told The Australian the agency would meet with Australian iron ore miners over the coming months if lower prices persisted.
“We will speak to issuers about their plans if these pricing levels materialise over the medium term, and look at their options for the balance sheet to absorb the weaker earnings,” Mr Moore said.
The downgrade in expectations reflects what Moody’s called an “aggressive supply push by major iron ore producers”.
Both BHP Billiton and Rio Tinto have made it clear in recent weeks they intend to continue with planned capacity expansions. The plans have angered West Australian Premier Colin Barnett while Fortescue Metals Group chief executive Nev Power said the majors’ strategy was “flawed”.
BHP and Rio were expected to add 69 million and 70 million tonnes of capacity respectively by 2018, Moody’s said, while Brazil’s Vale would grow its annual output by 105 million tonnes over the same timeframe. Fortescue’s recently completed expansion will add another 31 million tonnes.
The agency said low-cost producers like BHP and Rio would have more tolerance to absorb lower prices in the near term than companies such as Fortescue and Atlas Iron.
THE AUSTRALIAN OCTOBER 21, 2014 12:00AM
Paul Garvey
Resources Reporter
Perth
MOODY’S Investors Service could downgrade its credit ratings on Australia’s more marginal iron ore producers in the coming weeks after the ratings agency slashed its price expectations.
Moody’s is now modelling for iron ore to range between $US75 and $US85 a tonne through 2016, down from its previous expectations of a range of $US95-$US105 a tonne.
Any downgrades from the ratings agency could hasten equity raisings among the higher-cost producers struggling to repay debts after a 40 per cent fall in iron ore prices this year.
The deep cut to expectations reflects a continued surge in supply and “muted growth” in global steel production.
Moody’s senior analyst Matthew Moore told The Australian the agency would meet with Australian iron ore miners over the coming months if lower prices persisted.
“We will speak to issuers about their plans if these pricing levels materialise over the medium term, and look at their options for the balance sheet to absorb the weaker earnings,” Mr Moore said.
The downgrade in expectations reflects what Moody’s called an “aggressive supply push by major iron ore producers”.
Both BHP Billiton and Rio Tinto have made it clear in recent weeks they intend to continue with planned capacity expansions. The plans have angered West Australian Premier Colin Barnett while Fortescue Metals Group chief executive Nev Power said the majors’ strategy was “flawed”.
BHP and Rio were expected to add 69 million and 70 million tonnes of capacity respectively by 2018, Moody’s said, while Brazil’s Vale would grow its annual output by 105 million tonnes over the same timeframe. Fortescue’s recently completed expansion will add another 31 million tonnes.
The agency said low-cost producers like BHP and Rio would have more tolerance to absorb lower prices in the near term than companies such as Fortescue and Atlas Iron.