All sub-sectors aside from mining were given a stable outlook, but Moody’s said the metals and mining sector faced tough business conditions for the next 12 months.

“While prices have recently improved for some commodities, downward pricing pressures remain and we expect continuing volatility ahead,” it said.

“We expect low overall growth in earnings and cash flows in 2013.”

Over the past year, Moody’s has downgraded iron ore miners Fortescue Metals Group (Ba3 negative), Atlas Iron (B2 stable) and nickel producer Mirabela Nickel (Caa1 stable) due to lower commodity prices, and warned those ratings could come under further pressure if prices dropped further.

“While margins for the large single-commodity producer Fortescue Metals Group should remain at solid levels, at the prevailing level of iron ore prices, weaker iron ore prices have led to lower than previously expected cashflow generation,” Moody’s said.

“In addition, the smaller, less-advanced high-yield miners such as Midwest Vanadium and Mirabela Nickel will continue to face significant challenges resulting from ongoing execution risks, high costs of production, and weak liquidity.”

Moody’s expects the credit fundamentals for major diversified miners such as BHP Billiton to remain resilient.

The agency had a particularly weak outlook for the global base metals sector due to the slowdown in China’s growth.

“Base metal prices will continue to be weak until global growth picks up meaningfully,” Moody’s said.

Moody’s said it expected miners to proceed with expansion plans, though additional production growth would be limited thanks to weaker commodity prices.

Meanwhile, mining services companies should be supported by previously committed mining investments, though providers would be more vulnerable.

Moody’s expects rail providers such as Asciano and Aurizon, and explosives maker Incitec Pivot to be insulated from the drop in commodity prices.

Overall, Australian corporates will need to raise about $28 billion in the next two years to refinance maturing debt, but Moody’s said the risk was manageable.

A downside risk to the overall stable performance of Australian companies was a sharp slowdown in Chinese gross domestic product growth, Moody’s said.

“Such a scenario, though unlikely in our view, could slow Australia’s GDP growth to 1-2% and materially impact the metals and mining, airlines and discretionary retail sectors, though it would also have broad, indirect impacts on other sectors.”

Moody’s expects the Chinese government to introduce measures to stabilise growth to about 7.5%.