Major miners on credit watch as iron ore price plunges: S&P

Some of the world's biggest iron ore miners were today placed on "credit watch negative" by Standard and Poor's, as ore prices plunge due to a supply glut and soft Chinese demand.
The global ratings agency said the credit watch change was due to a lowering of its iron ore price forecasts to USD 45 per tonne for the rest of this year, to USD 50 for next year and USD 55 for 2017.
The previous forecasts were USD 65 this year and 2016, and USD 70 for 2017.
The price of the ore, a key ingredient in steelmaking, has fallen by 60 per cent over the past 12 months to reach a decade-low of USD 47.08 in early April.

The eight iron ore producers being watched by S&P are Anglo-Australian giants BHP Billiton and Rio Tinto, Brazil's Vale, Australia's Fortescue Metals, Anglo-South African firm Anglo American, Chile's CAP, Luxembourg-based Eurasian Resources and South Africa's Exxaro Resources.
"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 also placed Western Australia on credit watch negative, saying tumbling iron ore prices would "considerably reduce" its mining royalties. The state is heavily dependent on the mining sector for growth.
A credit watch meant there was a 50 per cent chance of a rating change, which in these cases was downwards, S&P's managing director for corporate ratings Anthony Flintoff said in a briefing, adding that the agency would announce its decisions within 90 days.
Ongoing concerns about the slumping price saw shares in BHP and Rio lose ground in Australia today. BHP fell 1.02 percent to close at 29.12 Australian dollar while Rio slipped 0.62 per cent to end at 54.96 Australian dollar.

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 programme, 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.