Bangkok--30 May--Moody's Investors Service Moody's Investors Service has a stable outlook for the ratings of base-metals, mining, and steel companies in Asia Pacific over the next 12-18 months, according to a new report from the rating agency. The report says higher output prices, well above long-term averages, will offset pressures from increased operating and capital costs that would ordinarily crimp cash flows. The upward lift to ratings from enhanced revenues balances the downward ratings drag of rising costs. "Despite a stagnant U.S. economy, China should continue to act as the engine of demand that underpins the ratings of metals and bulk commodities, with supporting roles from ongoing infrastructural build-outs in countries like India, Brazil, and Russia," says the report's lead author, Terry Fanous, a Moody's senior vice president. "China's high-speed growth is likely to be slower than in the past, but the combination of production and delivery bottlenecks, tight supply and inventories, higher raw-material costs, and problems with power supplies in certain producing countries will help keep prices well above long-term averages," adds Fanous. The report notes that inflationary pressure on costs is constraining the companies' profit margins and that vertically integrated producers with captive raw material are best positioned to take advantage of such an environment and enjoy relative stability or uplift in their ratings. Other issuers have passed on rising costs to their end consumers and thus avoided any negative rating implications. A contributor to the report, Laura Acres, a vice president and senior analyst, says, "Indonesian coal companies have been relatively insulated from the current instability in regional credit markets, due to rising coal prices which have fueled high levels of liquidity. The overall attractiveness of the sector has enabled producers to successfully target both debt and equity markets in raising funds for expansion and refinancing." Acres adds, "Regulatory risk exists in some of the region's top mineral-and-metal exporting countries, but we do not foresee an imminent impact on any of the rated companies' credit profiles." The report also notes that Australia's plan to implement a trading scheme for carbon emissions by 2010 will have potentially negative rating implications for Australian issuers over the longer term. Entitled "Asia-Pacific Base Metals, Mining, and Steel: Stable Outlook Amid Margin Pressure", the report is available 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 Laura Acres Vice President - Senior Analyst Corporate Finance Group Moody's Asia Pacific Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (852) 3551-3077