Commodity Price Drop to Force Miners to Increase Asset Sales

Three of the world’s top five miners will need to step up asset sales in the second half of this year to meet a $14 billion full-year target as they race to cut debt, with a recent rally in commodities prices seen as short-lived.

The world’s biggest miners predicted doom and gloom for 2016 six months ago when they booked their worst earnings in more than a decade, slashed dividends and put an array of copper, coal, iron ore and other assets on the block.

Glencore (GLEN.L), Anglo American (AAL.L) and Vale (VALE5.SA), have so far raised $5.4 billion from asset sales, less than half their target, delaying efforts to reduce debt and boost their battered credit ratings.

Investors will be looking to see how much pressure miners feel on the pace of sales when they report results in coming weeks, led off by Anglo American and Vale on Thursday.

“Higher commodity prices take away some pressure on companies to sell, but the situation remains tense,” said David Finger, an analyst at Allianz Global Investors in London.

Asset sales lost steam amid a first-half rebound in commodity prices fueled by China’s efforts to shore up growth. Iron ore and coal prices rallied around 30 percent and copper prices rose around 7 percent, easing the sense of urgency for sellers while bidders waited for the rallies to fizzle.

But bankers, analysts and investors expect the tide to turn in the second half. Even miners see prices falling as iron ore, coal and copper markets remain oversupplied.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza