Moody's expects stable outlook for Brazilian steel industry in 2019

Friday, 14 December 2018 22:50:14 (GMT+3)   |   Sao Paulo

Credit rating agency Moody's said late this week the outlook for the Brazilian steel industry for 2019 remains stable. The stable outlook is supported by a “gradual growth” for the local main steel-consuming industries, the agency said.

“Growth is likely for Brazil's steel industry despite the risk of political uncertainty under new (Bolsonaro) government,” commented Moody's Assistant Vice President, Carolina Chimenti.

She added that local flat steel producers will likely continue to benefit from the auto sector's growth by “increasing capacity utilization and profitability.” Long-steel sales should also benefit from growing new housing projects, Chimenti said.

Moody’s forecasted steel exports to remain low due to increased US protectionism, leading to “stronger competition from other producing countries such as China and Turkey.” On the other hand, imports are not expected to pose a significant threat to local steelmakers in the current environment, the Moody’s report said.

“Amid moderate recovery, EBITDA remains stable for Brazil's three main steelmakers (Gerdau, CSN and Usiminas) with 15 to 20 percent margins for domestic operations. Moody's expects similar levels are likely for 2019 after significant cost-cutting initiatives during 2015-16 recession and price increases in this year,” the report said.

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