(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: 2016 Outlook: Global Mining
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874187
LONDON, December 03 (Fitch) Fitch Ratings' outlook for the global mining sector
in 2016 is firmly negative, reflecting our view that Chinese demand will
continue to weaken in the coming year and that commodities will remain deeply
unpopular with investors.
The slowdown in Chinese demand has already created substantial oversupply in
some commodities, including iron ore and aluminium, and we expect this trend to
continue in 2016 as the Chinese economy undergoes a gradual deleveraging and
transition from investment to consumer-led growth. Average prices for these two
commodities are therefore likely to be lower in 2016, as are prices for copper
and zinc. Nickel could prove an exception to the trend, due to mine closures and
falling Chinese nickel pig iron production, but this is far from certain.
Most mining companies now have weak credit profiles for their current rating,
and this is reflected in the fact that most large international mining companies
are on Negative Outlook or Rating Watch Negative.
We expect companies to continue to focus on cost control and short-term
liquidity management in 2016. But they will find it harder to use cost cuts to
aid debt reduction because the falling diesel prices and beneficial exchange
rate moves that helped them in 2015 are unlikely to be repeated. Big reductions
in capex budgets are similarly largely complete. This means more mining
companies are likely to come under increasing pressure to cut their dividends to
boost free cash flow in 2016 following relatively modest reductions in
shareholder returns so far.
For more information on our expectations for the sector, see the report "2016
Outlook: Global Mining" available at www.fitchratings.com or by clicking the
link above.
Contact:
Peter Archbold
Senior Director
Corporates
+44 20 3530 1172
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
Monica Bonar
Senior Director
Corporates
+1 212 908 0579
Simon Kennedy
Director
Fitch Wire
+44 20 3530 1387
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:
peter.fitzpatrick@fitchratings.com; Alyssa Castelli, New York, Tel: +1 (212) 908
0540, Email: alyssa.castelli@fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market
commentary page. The original article can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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