Moody's keeps Brazil's Vale on investment grade despite China slowdown

Moody's maintained the investment grade status of Brazilian mining giant Vale despite a more challenging scenario for commodity prices. 

The agency kept Vale’s rating at ‘Baa3’ with a stable outlook, above Brazil’s sovereign rating, which at ‘Ba2’ is in speculative territory.

"The affirmation of Vale's ratings reflects its strong business profile, as one of the largest iron ore producers and one of the largest nickel producers globally, and the ability to resume operations under stricter risk and safety controls after the dam incident in Brumadinho, with greater production flexibility which will lead to cost reduction and allow the company to continue to generate positive FCF [free cash flow] even in an environment of weaker commodity prices," said Moody's in a statement.

Vale has been increasing its production in recent quarters after being affected by the failure of the tailings dam in Brumadinho, in Minas Gerais state, in early 2019.

In recent weeks, Vale, along with other Brazilian mining firms, has seen its shares tumble as the Chinese economy shows signs of a slowdown. Chinese companies are important customers of Vale.