India only area of strength in Asian steel market: Moody's

India is the "only area of strength" in the subdued Asian steel market aided by rising demand and government measures to curb imports like MIP and anti-dumping duties, Moody's Investor Service said today.

The outlook is negative as the earnings will weaken amid declining production and lower profits, the credit rating agency said in its Asian 2017 Outlook report.

"For 2017, we see India as the only area of strength — with rising demand and protectionist measures in place," Moody's Vice-President and Senior Analyst Jiming Zou said in a statement.

In India, growing domestic demand, minimum import prices (MIP) and anti-dumping duties will support steel producers, but the increase in their steel production will not offset the fall in regional production, he added.

The country only accounts for only about 8% of the Asian steel production.

"We expect EBITDA per tonne to weaken in 2017, given that the robust profitability recorded by steelmakers in mid-2016 is unsustainable against the backdrop of persistent oversupply and the limited ability to pass on rising raw material costs to customers," Zou said.

Moody's expects Asian steel production volumes to fall in 2017 because demand from China — which accounts for about three quarters of Asian steel production — will contract, while rising trade barriers will constrain exports from Asia.

"One of the main drivers for declining demand in China is the forecast that property sales volumes will decline moderately following the tightening of regulatory measures in September and October 2016," it said.

In this context, continued infrastructure investments are insufficient to avert a decline in China's demand and its manufacturing activities remain vulnerable to slowing GDP growth and are therefore unlikely to boost steel demand, it added.

With Japan, Korea and Taiwan, which export around 40-50% of their steel output, increasing trade frictions will curb their steel exports and production, Moody's said.