“The commodity downturn is unparalleled in its depth and breadth. Oil, copper, aluminium, and many other basic materials, have fallen in price to severely depressed levels, pressured by the synchronised forces of slowing demand and excess supply,” Moody’s analysts wrote last week.

Between 2010 and October this year, US$1.9 trillion in bonds were issued by related companies, about 18 per cent of global non-financial bond issuance, according to Dealogic; money that was used to finance production facilities that in turn contributed to a global supply glut just as global growth rates headed south. For example, copper is widely forecast to have a physical surplus of around 150,000 tonnes next year, Fitch analysts wrote.

Representing just 14 per cent of Moody’s global non-financing corporate ratings, oil and gas and metals and mining firms already accounted for 36 per cent of 2015 downgrades through October, and 48 per cent of defaults. Moody’s has placed a third of such firms on review for downgrade or assigned them a negative outlook.

“The commodity crisis is the sole driver of the year-on-year increase in the global speculative-grade default rate to 2.7 per cent from 2.1 per cent,” Moody’s analysts wrote.

Reflecting industry headwinds, South African mining giant Anglo American announced plans this week to slash two thirds of its 135,000 workforce, suspend its dividend and sell or shutter unprofitable mines. The firm’s London-listed shares plunged around 13 per cent on the news and are now down 75 per cent this year, while the company’s bond yields rose as investors sold down the debt.

“Most mining companies now have weak credit profiles for their current rating, and this is reflected in the fact that most large international mining companies are on negative outlook or rating watch negative,” including market leaders BHP Billiton and Rio Tinto, Fitch analysts wrote.

“We expect companies to continue to focus on cost control and short-term liquidity management in 2016. But they will find it harder to use cost cuts to aid debt reduction because the falling diesel prices and beneficial exchange rate moves that helped them in 2015 are unlikely to be repeated.”

Big reductions in capital expenditure budgets are similarly largely complete. This means more mining companies are likely to come under increasing pressure to cut their dividends to boost free cash flow in 2016 following relatively modest reductions in shareholder returns so far, Fitch analysts wrote.

The anticipated economic benefits usually derived from weaker commodity prices were in part offset by the strengthening US dollar, as this added to the cost of US dollar-priced commodity imports for many countries.

Key to any recovery in the sector will be China, where half the world’s base metals are consumed, but analysts at the two ratings firms say the central government’s focus on developing a consumer-led economy rather than an investment-led one means reduced fixed-asset investment that will only weigh further on the mining sector as the rate of new commodity consuming infrastructure and construction projects slows.

A big driver for global iron ore and nickel markets in recent decades, China’s steel consumption will remain flat at between 750 million and 770 million tonnes while steel capacity will likely hit 1.17 billion tonnes this year and 1.174 billion in 2016 before falling the year after, Fitch analysts predict. The firm predicts Chinese gross domestic product growth will be 6.3 per cent next year, below government forecasts.

Even a slight pickup in new Chinese housing activity in late 2016, as forecast by Fitch, may have a muted impact on commodity prices given overcapacity in China’s steel and aluminium sectors, with production operations scheduled for closure.