Bangkok--7 Jul--Moody's
Moody's Investors Service says in its latest update on the Asia-Pacific steel industry that its outlook for the sector is stable.
"Our outlook reflects our expectation for continued growth in regional demand, particularly from China," writes Chris Park, a Moody's VP-Senior Analyst and author of the report.
"Despite a considerable YoY slowdown in demand growth due to monetary and fiscal tightening, China's industry-wide utilization is likely to remain firm over the near to medium term in view of the expected slowdown in capacity growth," Park goes on to say.
Steelmakers' profitability in Japan and Korea should improve considerably in 2010 and 2011, on a recovery in domestic demand -- although still low compared to pre-crisis levels -- and rising exports. Steelmakers in the region will also benefit from the Chinese government's recent abolition of export tax rebates, as this will ease the threat of imports from China.
India's domestic steel demands should remain robust, with demand this year growing in the mid-teens, fueled by the strong ongoing demand for autos and engineering services.
On the negative side, Moody's expects that the degree of improvement in steelmakers' margins will be constrained by softening steel prices and higher input costs, which steelmakers will not find easy to pass on to key customers.
In addition, the move to quarterly pricing could cause a quarterly mismatch of average selling prices and raw material prices raise short-term earnings volatility.
"Any unexpected weakness in China's economy could have a material impact on the fortunes of the sector and threaten our stable outlook -- although we don't expect anything untoward to occur in the near term. Our central scenario for China's economy assumes robust GDP growth over the next couple of years." Park adds.
For more information, please access the report, "Strong Regional Demand Supports a Stable Outlook," at www.moodys.com.
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Hong Kong
Chris Park
Vice President - Senior Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Hong Kong
Gary Lau
Managing Director
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077