LONDON (S&P Global Ratings): Set 3, 2016–On Aug. 26, 2016, S&P Global Ratings published its new price assumptions for metals, including upward revisions of aluminum, iron ore, gold and zinc prices. We also see more favorable prices for commodities such as thermal coal, coking coal, platinum, and others.
In a commentary published today, “The Big Miners: More Stable Ratings But Industry And Commodity Price Risks Remain,” S&P Global Ratings says that at this stage, the new assumptions have not led it to alter its ratings on the major miners, but they have contributed to some outlook revisions to stable from negative. Prices have recovered from record lows earlier this year, but we anticipate that they will remain highly volatile. The outlook changes also reflect the deleveraging focus of the big mining companies, which have cut dividends, capital expenditure, and operating expenses, and undertaken noncore asset disposals.
“We believe our revised price assumptions and the big miners’ ongoing credit-protective measures will result in performance and credit metrics broadly consistent with our existing rating parameters,” said S&P Global Ratings credit analyst Tommy Trask. We therefore currently see the risk of further downgrades as less than one-in-three for the largest rated mining companies. For BHP Billiton, the outlook remains negative, but we see now lower chances of a downgrade than in February 2016.
Nonetheless, commodity prices, currencies, and industry conditions remain dynamic, and we will adjust our rating assumptions regarding external factors and miners’ strategic and financial policies as appropriate if circumstances change.
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