The international credit rating agency Fitch has announced a negative outlook for the western European steel industry, stating that it does not expect steel output to recover in 2013 due to depressed demand levels across the euro zone.
According to Fitch's estimates, steel volumes in western Europe will probably fall by up to three percent in 2013, putting pressure on steelmakers' profitability and free cash flow generation. However, profit margins may be supported by the falling cost of raw materials.
The western European steel industry may witness a potential increase in demand from automotive manufacturers and mechanical engineering in 2013, while construction is the weakest segment. This lackluster demand indicates that prices are likely to remain flat through 2013.
Regarding raw material costs, for 2013 Fitch expects general raw material prices to be marginally lower on average than in 2012, having a favorable impact on steelmakers' profit margins.