International credit rating agency Standard & Poor's has announced that it has lowered its rating for Brazilin miner Vale to 'BBB+' from 'A-'. The outlook is stable.
S&P stated that the downgrade reflects the expectation that Vale's financial risk profile will weaken in the next two years to levels incompatible with the previous rating. The rating agency also added that the downgrade follows S&P's revision of iron ore price assumptions to $65/mt in 2015 and 2016 and to $70/mt in 2017.
However, S&P expects lower freight and production costs to compensate for the severe price drop because the cost of fuel, for vessels that transport the ore to the final destination, has dropped 40 percent and the Brazilian real has depreciated 15 percent in the past six months.
According to S&P, Vale's business risk profile remains "strong", based on the miner's large share of the iron ore seaborne market, at 22 percent, its high-quality mineral reserves with an average iron content of 52 percent, and very low production costs.