Weak demand from Europe to weigh on flat steel producers like ArcelorMittal, Tata Steel: Moody's

Steel demand from Europe's auto companies will weaken into 2020, which will particularly hurt flat steel producers like ArcelorMittal, thyssenkrupp and Tata Steel, Moody's Investors Service said on Tuesday.

It also said the outlook for the European steel sector for the coming 12 to 18 months is negative.

"Steel demand from Europe's auto companies, which are the second largest steel consumers after construction, will weaken into 2020 as vehicle sales fall.

"This will particularly hurt flat steel producers like ArcelorMittal, thyssenkrupp and Tata Steel for whom automakers are important customers," Goetz Grossmann, Moody's AVP - Analyst, said in a statement.

Although demand in the European construction industry remains healthy, this will soften in 2020 as confidence deteriorates, Moody's added.

"The key drivers of the negative outlook are a combination of weaker macroeconomic conditions and waning consumer confidence, which are undermining demand and could lead to a forecast 2 per cent contraction in steel consumption into 2020," it said.

The main growth driver will be a buoyant civil engineering sector, it added.