International credit ratings agency Fitch Ratings has downgraded Japanese steelmaker Nippon Steel & Sumitomo Metal Corporation's (NSSMC) long-term rating to BBB from BBB+, assigning the company a negative outlook.
Fitch stated that the downgrade reflects NSSMC's weakened financial profile amid the global steel industry downturn, while the negative outlook indicates the low visibility and uncertainty regarding the likely recovery of the steel industry in 2013.
According to Fitch, the global steel industry, which has been weighed down by a slowdown in the Chinese economy since the second half of 2011, remained sluggish throughout 2012. Easing pressure from raw material price inflation has been offset by slower demand, leading to further contraction in steel margins. As a result, NSSMC's operating performance for the first half ended September 30 of the financial year 2012-13 has been well below Fitch's expectations.
As SteelOrbis previously reported, in October the rating agency Standard and Poor's also lowered the credit rating for NSSMC to BBB from BBB+, citing the slowing down of the recovery in the company's earnings due to low steel prices, reducing the likelihood of a quick improvement in the company's financial risk profile.