Global credit ratings agency Moody's has stated in a report that the outlook for the Asian steel industry is stable, reflecting the consideration that the profitability of rated producers will increase moderately over the next 12 months against the backdrop of overall steady regional demand.
Moody’s stated that China's capacity cuts and stringent environmental protection measures will also support profitability. However, business fundamentals and profitability will vary by company and country.
According to the credit ratings agency, Asian steel demand will remain steady over the next 12 months to June 2019, because solid growth in 2018 will offset a likely softening in 2019. The expected softening in demand in 2019 is because China's apparent demand will likely decrease by a low-single-digit percentage, reflecting likely slowdowns in the growth of the property sector and in infrastructure investments. The expected decline in China's steel demand also factors in the ongoing US-China trade dispute, given the indirect impact through supply chains.
Demand in South Korea and Japan will remain largely stable; while demand in South and Southeast Asia continues to be robust, tracking solid GDP growth. Rated Japanese and South Korean companies will be mostly unaffected by the US tariffs or quotas on steel imports because they export small amounts of their production to the US.
However, the impact on Asian steel demand would be greater if the trade dispute escalates, for instance, if the US implements 25 percent tariffs on $200 billion worth of Chinese imports or tariffs on auto imports, according to Moody’s.