A steady flow of write-downs across most metals and oil and gas is tipped over the next year, as many of the mining majors tweak their medium-term price forecasts and try to offload non-core assets in a depressed market.
The big miners are facing profit falls of between 30 and 60 per cent in their next round of results, with their impressive cost cutting not enough to offset the commodity price rout.
Glencore is a candidate to take hits in nickel and possibly other base metals at its interim results, analysts say.
If thermal coal prices continue to languish at $US60 a tonne, Glencore could also write down its Australian coal holdings over the next year, and Anglo American could impair some of its South African coal assets, but probably at the full year.
Ahead of its interim results on Friday, Anglo flagged a writedown of up to $US4 billion ($5.42 billion) post-tax on its Brazilian iron ore mine and some Australian coal assets, two days after BHP Billiton took a $US2.8 billion (pre-tax) impairment on its US shale gas business.
UBS analyst Glyn Lawcock said he expected write-downs across most commodities, with miners that had recently executed mergers and acquisitions or built projects most at risk.
Investors had expected BHP’s writedown on US shale to be considerably bigger.
“Using forward [price] curves for other commodities there are probably other risks inside BHP and other companies,” Mr Lawcock said.
In the past 12 months prices from copper to nickel to oil, coal and iron ore have dropped dramatically. The price rout will put huge holes in underlying earnings for the big five players – BHP, Rio Tinto, Glencore, Anglo American and Vale.
BHP’s underlying earnings for the year to June are expected to fall 33 to 40 per cent, from $US13.4 billion the previous year to about $US8.06 billion.
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