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Asian steelmakers' profitability to remain healthy in 2019 despite softening demand: Moody's

Press Trust of India  |  New Delhi 

The overall profitability of Asian steelmakers will stay strong in 2019 despite softening demand, said Thursday.

In its latest report titled '2019 Outlook', Moody's said its outlook for the industry in in 2019 was stable, based on assessment of broadly steady profitability for rated makers over the next 12 months.

"In the coming year, demand for steel in is likely to stay at levels similar to that in 2018, indicating a softening from the robust growth seen in 2018," Kaustubh Chaubal, Moody's said.

As for profitability, rated Asian will see their profitability levels weaken mildly because of a decline in Chinese demand growth but stay strong overall, he said.

The strong profitability is underpinned by robust demand in south and southeast Asia, as well as China's capacity cuts and strict environment protection measures, Moody's said.

The Chinese drives the outlook for the sector in Asia as is by far the region's largest and

"Our forecast of flat in for 2019 reflects higher infrastructure spending that will limit the negative effects of the ongoing Sino-US trade dispute, and slower growth in China's real-estate investments," Kai Hu, Moody's said.

The escalation of the Sino-US trade dispute will have a limited effect on demand, given the moderate indirect impact through supply chains and manageable direct macro impact, Moody's said.

However, the spillover effects could be greater, and potential US tariffs on imported vehicles pose key downside risks to Japanese and Korean steelmakers.

Moody's expects China's capacity cuts and stringent environment protection measures to mitigate weaker growth in the country.

The stable outlook also reflects China's Purchasing Managers' Index which remains above 50 indicating despite declining in recent months. Business conditions and profitability will vary by company and the particular economy that steelmakers operate in, it said.

In India, in particular, the consolidation in the and solid demand will support the robust profitability of (Ba3 positive) and (Ba2 stable).

"With Japanese and Korean steel makers, the profitability of rated companies will diverge because of their different exposures to various end-markets. For Japanese companies, profitability will hold steady or improve slightly, but for Korean like (Baa1 stable) and (Baa2 stable), profitability will fall moderately in 2019," Moody's added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, November 29 2018. 14:40 IST