Fitch Ratings has revised the outlook on BHP Billiton and Rio Tinto to negative from stable on the back of lower global commodity prices.
The rating actions follow Fitch re-calculating its price assumptions on major commodities, downwards for iron ore, copper and nickel and up for zinc.
BHP has held onto its A+ rating. However, the effect of South32’s spin-off on BHPB’s credit profile is marginally negative owing to a weaker projected free cash flow.
On the plus side, BHPB will benefit from a streamlined business structure. Fitch expects BHP to retain a strong profit margin.
Rio Tinto kept its A- rating but at the lower end of the category.
Fitch expects iron ore to be around $US50 a tonne in 2015-16, $US60 in 2017 and $US 70 long term.
The iron ore price is currently at $US69.