Iron ore dips to one-month low ahead of G20 Summit in Hangzhou

Iron has slipped to is its lowest price in 4 weeks, even as S&P upgrades Vale’s credit rating.

Haul trucks operate in the pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Ian Waldie/Bloomberg via Getty Images)

The iron ore price has continued to track lower, even as Brazilian miner Vale received an upgrade on its credit rating due to surprisingly strong prices in recent months.

Iron ore fell 0.5 per cent to $US58.80 overnight, according to The Steel Index, from $US59.10 in the previous session.

The commodity is now at its lowest point in four weeks, as China restricts some heavy industry ahead of the G20 Summit in Hangzhou on September 4 and 5.

But the steelmaking ingredient remains well above the expectations of most analysts, who have been calling for a sharper slump in prices for some time, which has so far failed to materialise.

Ratings agency Standard & Poor’s upgraded its outlook for Brazil’s Vale due to “currently favourable metals prices” leading to extra cash flows and less debt worry.

S&P lifted its outlook from negative to stable and affirmed the miner’s global rating at BBB-.

“The need for Vale to divest its assets to avoid debt from rising, in our opinion, is less necessary than before,” the agency said.

S&P also warned that prices are likely to soften in “the next year or so”, but said Vale is likely to increase its operating cash generation by around $US2 billion in 2016, higher than previous estimates, while keeping cash levels close to $US3bn by the end of the year, which could increase resilience in a downturn.

Overnight, an external panel also released its findings into the tailings dam disaster at BHP’s and Vale’s Samarco joint venture, finding that the dam collapsed because sand became saturated over time and collapsed suddenly under pressure.

In London trade, BHP Billiton rose 3.2 per cent, while Rio Tinto rallied 3.3 per cent.