The world’s biggest mining companies today
Shares of the Rio de Janeiro-based company dropped 4.6 percent to 17.48 reais at the close of trading in Sao Paulo, contributing most to the Ibovespa’s 0.4 percent loss. The stock was the worst performer among the world’s biggest mining companies today. The company’s benchmark bonds due in 2022 slipped 0.37 cent to 96.32 cents on the dollar.
S&P cut Vale’s rating one step on Jan. 23 to BBB+, the third-lowest investment grade, citing weakness in the iron-ore market. Prices for the mineral, which is used in steelmaking, declined 47 percent last year as producers including Vale increased output even as demand in China weakened. The commodity fell 4.3 percent today to $63.54 a dry metric ton, pushing this year’s drop to 11 percent.
The downgrade “reflects current balance sheet pressures from the weaker iron-ore pricing outlook,” Leonardo Correa and Caio Ribeiro, analysts at Grupo BTG Pactual, wrote in a note to clients on Monday. “It’s important to remember that Vale is still an investment-grade company, and will probably maintain this status over the next couple of years.”
The ratings company said iron ore may average $65 a ton this year, in line with estimates from Goldman Sachs Group Inc., which lowered its 2015 forecast for the commodity to $66 a ton from $80 in a Jan. 23 report. Citigroup Inc. and UBS Group AG also cut their estimates for iron-ore this month.