Fitch has downgraded the outlook of BHP and Rio Tinto to negative

Port Hedland

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.

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