International credit rating agency Moody's has announced that the outlook for Asia's steel industry remains stable on the expectation that demand will increase modestly and that there will not be any significant additions to steel capacity in China over the next 12 months.
Moody's indicated that the imbalance in the supply and demand for steel in China, which accounts for over 70 percent of total steel production and consumption in the region, is the key reason for the industry's weak fundamentals. This imbalance is expected to stabilize in 2013, as consumption rises modestly and capacity addition slows.
According to Moody's, the profitability of Asian steelmakers will improve moderately in the next 12 months, although it will remain significantly below their historical averages.
Moody's expects net steel exports from China to grow over 20 percent year on year in 2012 and remain near that level in 2013, preventing profit margins of Asian steel producers from improving significantly.
The credit ratings of seven steelmakers in Asia rated by Moody's, namely, Baosteel Group Corporation, China Oriental Group Co Ltd., Hyundai Steel Company, JFE Holdings Inc., Nippon Steel & Sumitomo Metal Corporation, POSCO and Tata Steel Ltd, will remain under pressure, as highlighted by their negative rating outlooks.