International credit rating agency Moody’s has stated that the outlook for Asian steelmakers in 2017 is negative as earnings will weaken amid declining production and lower profitability. Moody’s expects Asian steelmakers’ EBITDA per metric ton to weaken in 2017, given that the robust profitability recorded by steelmakers in mid-2016 is unsustainable against the backdrop of persistent oversupply and the limited ability to pass on rising raw material costs to customers.
According to Moody’s statement, it expects Asian steel production volumes to fall in 2017 because demand from China, which accounts for about three quarters of Asian steel production, will contract, while rising trade barriers will constrain exports from Asia. One of the main drivers for declining demand in China is the forecast that property sales volumes will decline moderately following the tightening of regulatory measures in September and October this year. In this context, continued infrastructure investments are insufficient to avert a decline in China's demand, and its manufacturing activities remain vulnerable to slowing GDP growth and are therefore unlikely to boost steel demand.
As for India, the credit rating agency stated that growing domestic demand, minimum import prices and antidumping duties will support steel producers in India, but the increase in their steel production will not offset the fall in regional production. The country only accounts for only about eight percent of Asian steel production.