Credit rating agency Moody’s said Brazil’s steel industry should remain under pressure in ongoing year, as the nation’s poor economic outlook hinders the automotive, construction and capital goods industries.
The agency said demand for steel has declined in Latin America’s largest economy, as credit conditions “have tightened with rising interest rates and lower disposable incomes.”
“The engineering and homebuilding sectors, which together account for 40 percent of Brazil's steel consumption, are also facing serious strains. Compounding the issues in the domestic market, the steelmakers also face a challenging international environment,” Moody’s noted.
Moody’s said the surplus of steel in the global market should persist “for several more years,” as Chinese steel production remains high.
Credit rating agency Moody’s has recently downgraded the ratings of three major Brazilian steelmakers, including Usiminas, Companhia Siderúrgica Nacional (CSN) and Gerdau.
The agency said the ratings reflect the “uncertainty around their ability to execute their plans quickly and at favorable terms.”
“A persistent market downturn without any prospects of recovery would worsen their credit quality,” it warned.