International credit rating agency Moody’s has announced that it has changed the outlook for the Asian steel industry to stable from negative on the expectation that profitability will remain steady.
According to Moody’s’ statement, the removal of excess steel-production capacity in China and broadly steady steel demand in the region will be the main drivers of this profitability. The Asian steel industry's profitability has increased since bottoming out in 2015 and the improvement in 2016 was led mainly by a recovery in industry fundamentals in China, resulting from 2.3 percent growth in apparent demand and a higher-than-expected reduction in production capacity.
The credit rating agency stated that Asian steel demand will remain stable with demand growth robust in South and Southeast Asia alongside GDP growth, and stable demand in China. Moody’s expects China's apparent steel demand to increase about 2.5 percent this year and be flat in 2018. Among major steel-producing Asian countries, operating conditions in India will be the most supportive owing to robust domestic demand and protectionist measures. Regarding Japan and South Korea, domestic demand will stay steady, which, along with steelmakers' moves to cut costs and boost production of premium products, should keep their profitability stable or slightly higher. On the other hand, Chinese steelmakers' profitability will decline slightly in the current year following the strong second half of 2016.