RIO DE JANEIRO, Jan 29 (Reuters) - Ratings agency Standard & Poor’s downgraded on Friday Brazilian miner Vale SA to “BBB-”, the final rating considered investment grade, citing persistently low commodity prices.
S&P also put the world’s largest producer of iron ore on a negative outlook, signaling the company could be downgraded again in the near future.
“The downgrade reflects the weakening conditions in the iron ore markets, which we expect to remain through 2018,” S&P said in a statement.
The move comes a week after Moody’s also put Vale on review for a possible downgrade to junk status.
S&P said Vale could lose its investment grade if the company’s debt ratio to earnings before interest, tax, depreciation and amortization (EBITDA) were to remain above a multiple of five for more than two years.
Vale is currently reeling from a massive drop in the price of iron ore to $40 per tonne from $135 in 2014. Analysts expect the company to be cash flow negative this year as Vale continues to invest heavily in a new iron ore mine in the Amazon which should start producing at the end of 2016.
To try and fill its cash gap, Vale is looking to sell assets but a difficult market has slowed progress.
Reporting by Stephen Eisenhammer; Editing by Lisa Shumaker