• Rating lowered to BBB- from BBB with negative outlook held
  • Metal meldown signals `much weaker credit metrics' 2016, 2017

Vale SA had its credit rating cut to the lowest investment grade level by Standard & Poor’s as a collapse in metal prices weakens the biggest iron-ore miner’s finances.

The Rio de Janeiro-based company, which is also the world’s biggest nickel miner, was lowered to BBB- from BBB, S&P wrote in a statement Friday.

The rating company retained a negative outlook on Vale, which means it may slide into junk status as commodity producers’ efforts to contain costs and debt are overrun by a deepening price slump amid faltering Chinese demand.

Vale is stepping up efforts to sell assets and cut expenses, including a possible suspension of dividends, as the price collapse coincides with additional costs from a dam breach at a joint venture in Brazil and development of the industry’s biggest iron-ore project, called S11D.

“We now expect much weaker credit metrics for Brazil-based miner Vale in 2016 and 2017,” S&P wrote.

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