Miners Slide as Commodity Plunge Deepens on Dollar Gains

Commodities Slump Amid Global Unified Bearishness
  • Copper drops to lowest since 2009 as nickel, zinc slide
  • Bloomberg Commodity Index close to lowest in 16 years

BHP Billiton Ltd., the world’s biggest mining company, dropped to a 10-year low in Sydney trading, as producers slumped across global equity markets amid a deepening collapse in commodity prices.

Miners plunged after copper fell below $4,500 a metric ton for the first time since 2009 and nickel prices slumped to the lowest since 2003. The Bloomberg Commodity Index of returns on 22 raw materials is close to its July 1999 low and has dropped 22 percent this year.

Melbourne-based BHP may face a one-notch downgrade to its credit rating in the next 12 months depending on its response to potential further falls in iron ore and oil prices, Standard & Poor’s said Tuesday in a statement. The ratings agency affirmed its A+ rating on BHP and an A-1 rating on its related debt. It retained its negative outlook, it said.

Mining companies have been hit by slowing economic growth in China that has reduced demand in the biggest commodities user, spurring some producers to cut unprofitable output. Industrial metals have also retreated as the dollar strengthens on speculation that the Federal Reserve will boost interest rates in December.

“The negative outlook reflects the likelihood that continued weakness and volatility in commodity prices could weaken BHP Billiton’s cash generation and key credit metrics,” Melbourne-based S&P credit analyst May Zhong said in the statement. BHP won’t face any immediate impact on its ratings from the deadly mine disaster at its iron ore joint venture with Vale SA in Brazil, S&P said.

Both S&P and Fitch Ratings Ltd. have graded BHP at A+, the fifth-highest grade, with a negative view on the company. It carries the equivalent A1 score from Moody’s Investors Service with a stable outlook.

Melbourne-based BHP fell 1.8 percent to A$19.71 in Sydney trading, the lowest since November 2005. Fortescue Metals Group Ltd. declined 3.2 percent, South32 Ltd. tumbled 2.5 percent and Rio Tinto Group slipped 1.5 percent. 

Freeport-McMoRan Inc., the world’s biggest publicly traded copper producer, declined 3 percent Monday in New York and Vancouver-based First Quantum Minerals Ltd. dropped 5.8 percent. Glencore Plc, the worst performer this year in the FTSE 100 Index, lost 2.1 percent in London Monday, while the producer’s Hong Kong-listed shares advanced 0.8 percent Tuesday to HK$10.74 at 1:20 p.m. local time.

Copper for delivery in three months fell 0.2 percent to $4,482 a ton on the London Metal Exchange at 4:19 p.m. in Sydney. Nickel plunged as much as 1.9 percent to the lowest since May 2003.

‘Wild Gyrations’

“Wild gyrations in oil and another copper tumble could see further pressure on resource stocks,” Michael McCarthy, chief markets strategist in Sydney at CMC Markets, said Tuesday in an e-mail. “The rhetoric from the Fed suggests numbers would have to fall off a cliff to stop an interest-rate rise in December.”

Raw-materials prices have also been put under pressure on expectations that U.S. policy makers will soon raise rates for the first time since 2006. A stronger dollar makes metals priced in greenbacks costlier for buyers holding other currencies.

John Williams, president of the Fed Bank of San Francisco, said on Saturday that there was a “strong case” for a U.S. rate increase at the Fed’s last meeting of 2015.

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