Buoyed by a rally in commodity prices, Latin American oil and mining companies could hit the international capital markets with new bond issues early next year, sources tell LatinFinance.
Commodity prices, particularly oil, iron ore and copper, have rallied in recent weeks. Iron ore, a crucial export for Brazil and Chile, rose 120% this week to a 26-month high. And infrastructure spending in the US is set to rise in 2017, pushing up demand for potential steel orders.
“The market remains constructive when you look at spread levels,” a debt capital markets banker said. Uncertainty surrounding US fiscal policy over interest rates and inflation in the near-term is also expected to encourage prospective issuers to tap the market “sooner rather than later,” he said.
Brazilian miner Vale or Chilean copper producer Codelco are two companies that can tap the bond market on short notice, the banker added.
Spreads, particularly for oil and mining credits, have tightened after the uptick in commodity prices. Vale’s 6.25% $1bn 2026 notes issued in August 2016 traded at 295bp over US Treasuries on Tuesday, tightening around 30bp since December 1, another DCM banker said.
Codelco’s 2.5% $2bn 2025s, issued in September 2015, were seen at 190bp over US treasuries on Tuesday, around 5bp to 7bp tighter than the start of the month, the second banker added.
Mexico’s state-owned oil company Pemex took advantage of a swell in oil prices last week to print $5.5bn in cross-border notes. The trade came after OPEC members agreed to cut oil production.