International credit rating agency Moody’s has stated in a report that continued competition from cheaper Chinese and Russian imports, price volatility and rising raw material prices all conspire to keep the outlook for the European steel industry negative over the next 12-18 months.
According to the credit rating agency’s statement, the ongoing global and regional imbalance between supply and demand will continue to weigh on the sector and on steel prices in 2017 with the risk of higher pressure on profitability. The European steel sector continues to suffer from overcapacity and limited price negotiating power, particularly for the medium-size and smaller mills.
Moody’s stated that recent EU trade protection measures will slow Chinese and Russian imports, but the volume of imported steel products will remain significant in the year ahead as the initial positive effect of sanctions slowly disappears over time with imports from one targeted country replaced by others that are not subject to tariffs.
Meanwhile, Moody's estimates that steel demand in Europe will grow by one percent in 2017. Demand from the three major European steel-buying industries - automotive, construction and capital goods - will continue to grow in 2017, although at a slower pace in the auto sector.