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Moody's: Depressed Prices Keep European Steel Industry on Negative Outlook

06/10/2013 - The outlook for the European steel industry will remain negative over the next 12–18 months as a result of pressured steel prices, says Moody's Investors Service in a outlook update on the sector published on 10 June.

The outlook for the European steel industry will remain negative over the next 12–18 months as a result of pressured steel prices, says Moody's Investors Service in a outlook update on the sector published on 10 June.
The new report, entitled "European Steel Outlook Remains Negative As Recovery May Take Longer To Materialise", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.
"We expect weak demand, capacity utilization below 75%, and falling raw material prices to keep downward pressure on steel prices, not only for hot rolled coil but also for long carbon steel products used primarily in construction, high-strength steel used in transportation and engineered products, and stainless steel," says Steven Oman, a Moody's senior vice president and author of the outlook update.
Depressed steel prices will pressure nearly all of Moody's European issuers, including ThyssenKrupp AG (Ba1 negative), Aperam SA (B1 negative) and Schmolz + Bickenbach AG (B3 under review), while ArcelorMittal (Ba1 negative) should benefit from its global footprint and expanding iron ore production.
The prolonged weakness of the European economy has now affected every steel-using end market in Europe and is dampening demand in other regions, forcing Commonwealth of Independent States (CIS) producers, for example, to rely heavily on domestic sales. Moody's believes that steel demand within the 27 countries that make up the European Union will decline 2–4% in 2013, on top of a 9.6% decline in 2012.
GDP growth in the U.S., China and the rest of Asia has slowed, global Purchasing Manager Indices (PMIs) are hovering around 50, and structural issues are limiting government-sponsored stimulus measures. This limits European exports of cars and capital goods and exacerbates the steel supply-demand imbalance.
Moody's would stabilize the European steel industry sector outlook if the European PMI rose to 49 and capacity utilization moved to a modest 75%.