International credit rating agency Moody’s has announced that it has lowered its corporate credit rating for Indian steelmaker Tata Steel from Ba1 to Ba3, while downgrading its outlook to negative, reflecting the weaker-than-expected operating performance of Tata Steel in its key operating markets of India, Europe and Southeast Asia as a result of persistently weak steel prices.
According to Moody’s, the rating action also incorporates the impact of the recent Indian government announcement of the imposition of a minimum import price (MIP) on certain grades of steel shipped into the country for a six-month period. Moody’s stated that, notwithstanding the recent positive measures implemented by the Indian government for the domestic steel sector, the negative outlook for all the ratings reflects its expectation that global market conditions will remain challenging, with a further risk to the downside, and that Tata Steel's consolidated credit metrics will remain under pressure for the next 12 to 18 months.
Moody’s has also lowered the credit rating on Tata Steel’s subsidiary Tata Steel UK Holdings Ltd (TSUKH) to B3 from B2, which reflects the downgrade of parent Tata Steel's ratings, the challenging industry conditions evident in Europe, with a stressed pricing environment caused by high levels of competition from cheaper imported products from Asia and Russia, and its expectation that TSUKH's credit profile will remain weak given current depressed steel prices and weak utilization rates.