Bangkok--Mar 1--Moody's Investors
Moody's Investors Service says in a new report that it has a stable outlook for the rated Asian steel industry (ex-Japan), but lower prices and persistently higher input costs remain as key challenges for the industry. Within the sector, investment grade issuers display substantially better prospects for withstanding these challenges.
"Weakening industry fundamentals in the past nine months, due principally to the oversupply of certain steel products in China, have prompted
material declines in major product prices, albeit from cyclical highs," says Terry Fanous, a Senior Vice President in Moody's Sydney office.
"While prices have lately shown some improvement, we are assuming continued softness in 2006, although further material price deterioration is unlikely as China's strong economy should continue to support fundamentals", Fanous said.
The just-released report - entitled "Outlook Stable, But Bumpy Road Ahead" - looks at various themes, including key rating factors; profitability and cost efficiency; financial policy and financial strength; business diversity and other rating considerations.
Over the next 12 months, the sector's credit quality will be determined
by trends in regional steel prices and raw material costs and their effects on profitability and cash flow; expansion plans and their impact on financial strength; and the abilities of smaller companies to manage liquidity.
Within the rated steel companies in Asia, POSCO stands out as exhibiting
the greatest stability in its rating. The report notes concerns over the credit profile of small companies in the region, given their generally lower operating and financial flexibility in dealing with the inherent volatility in the industry.
The report can be accessed at www.moodys.com
Sydney
Terry Fanous
Senior Vice President
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Hong Kong
Angela Choi
Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121 End.