Moody's upbeat on steel, says Tata Steel to benefit from govt's measures

Moody's said that Tata Steel earnings will increase due to newly-added capacity, and the same will remain steady for JSW Steel

Robust domestic demand and protectionist measures by the government will help the domestic steel industry going forward and earnings of major players like Tata Steel will increase significantly due to newly-added capacity, says a report.

"Among the major steel-producing Asian countries, operating conditions will be the most supportive in India, because of the robust domestic demand and protectionist measures. This is despite an increase in raw material prices and new capacity additions," international rating agency Moody's said today in its 'Asia Steel Outlook 2018' report.

The agency said the earnings of Tata Steel will increase significantly due to newly-added capacity, and the same will remain steady for JSW Steel.

Moody's has given a stable outlook with Ba3 rating for both Tata Steel and JSW Steel.

"The likely stable profitability for Asian steelmakers is underpinned by the removal of excess production capacity in China and broadly steady demand in Asia as a whole," Moody's Senior Vice-President Kai Hu said.

"Overall Asian steel demand will remain stable, with robust demand growth in South and Southeast Asia, and flat in China as it sees Chinese capacity to continue to decline, due to its government's supply-side reforms and environmental protection measures, the factors which will reduce the supply glut in Asia," Hu said.

China drives the outlook for steel companies in Asia because the country represents the region's largest steel consumer as well as producer.

Elsewhere in the region, domestic demand will remain steady in Japan and Korea, which, together with their steelmakers' efforts to cut costs and increase production of premium products, should keep earnings in these two markets higher than last year, it added.