The international credit ratings agency Moody’s has announced its 2020 outlook for the Asian steel sector as negative, reflecting weakening profitability for rated steelmakers amid softening demand, declining steel prices, and elevated prices of iron ore which is a key input in finished steel products.
According to Moody’s, Asian steel producers’ profitability will decline by 25 percent by the end of 2019 and by another five percent in 2020. “With improved capital structures, the steelmakers are better placed this time around to weather weaker profitability," added the ratings agency.
Across the region, soft demand from the property and manufacturing sectors will limit Chinese steel demand growth. Over in South Korea, demand will soften because of sluggish construction and auto sectors, while the falling needs of the manufacturing sector will be the main driver behind Japan's softening steel demand. Similarly, demand will slow in India because of weak auto and manufacturing demand.
Moody's expects US tariffs to have a limited impact on rated producers' sales, though the prolonged US-China trade disputes will have repercussions through weaker macro conditions.