Fortescue Metals Group has suffered its second credit rating downgrade in a week due to the impact of low iron ore prices.
Standard & Poor's has cut its corporate credit rating on the miner to BB from BB+, because it expects Fortescue's debt to earnings ratio to rise as low prices bite.
"The downgrades reflect our expectation that Fortescue's financial risk profile will weaken significantly in the next two years due to low iron ore prices," S&P's credit analyst May Zhong said.
Moody's last week cut its corporate rating on Fortescue to Ba2 from Ba1, due to similar concerns.
Ratings downgrades are a negative reflection on a company's ability to repay debt, therefore making it harder and more expensive to borrow funds.
Iron ore prices recently hit their lowest level in a decade, but have recovered some ground in recent days to above $US50 per tonne.
S&P said its rating could be cut further if Fortescue fails to reduce its costs of production as expected, if iron ore prices fall below $US45 per tonne for a long period, or if the Australian dollar rises against the US dollar.
Fortescue cut costs by 17 per cent in the three months to March, and has said it can break even at an iron ore price as low as $US39 per tonne.
While critical of plans by major rivals BHP Billiton and Rio Tinto to increase iron ore production while prices remain low, Fortescue also plans to ship more iron ore in the current financial year.
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