International credit rating agency Standard & Poor's Ratings Services has announced that it has affirmed its 'BB' corporate credit rating on Australia-based mining company Fortescue Metals Group Ltd. The outlook remains negative.
S&P noted that the improvement in Fortescue's cost of production, reduced capital expenditure, and reduction in outstanding debt moderate the impact of lower price assumptions on Fortescue’s key credit measures. However, the negative outlook on Fortescue reflects the challenging market conditions facing iron ore players. Slower demand growth from China's struggling steel industry and continued increase in low-cost seaborne iron ore supply are sustaining tough conditions. As such, Fortescue's credit metrics could fall below S&P’s current expectations if external pressures intensify.