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Steel Industry Insight

Moody’s: European steel sector outlook stable in 2018 amid sustained demand, higher profits

International credit rating agency Moody’s has stated in a report that sustained demand, higher year-over-year profits and the success of antidumping measures should support European steelmakers’ credit metrics and underpin the stable outlook for the sector into 2018.

According to Moody’s’ statement, its 2018 outlook for the steel sector in Europe is stable on the back of expected growth in steel demand from the construction and auto industries. Economic expansion, as signaled by the sustained improvement in Europe’s Purchasing Managers Index (PMI), and rising profitability, as steel spreads widen, are also key supporting factors for the credit rating agency’s stable outlook. Moody’s expects that steel demand from the auto, construction and capital goods sectors will grow in 2018, with apparent steel consumption expected to grow 1.5 percent in 2018, broadly in line with Moody’s 1.9 percent GDP growth forecasted for the EU.

Moody’s stated that the EU antidumping measures against a number of countries, including China, will strengthen European steelmakers’ pricing power into 2018. However, steel imports into the EU will continue to rise moderately despite tariffs as countries outside the tariffs’ scope continue to export steel into the EU.

In addition, M&A in the sector is likely to rise on the back of higher valuations in today’s more stable market. However, current oversupply is unlikely to shrink until further consolidation has occurred. According to Moody’s, capacity is unlikely to fall in the next 18-24 months despite global steel giant ArcelorMittal’s purchase of Italian steelmaker Ilva and Germany-based steelmaker ThyssenKrupp’s joint venture with Indian steel giant Tata Steel.

 

*This was published on SteelOrbis website on December 11, 2017.


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