International credit rating agency Moody’s has announced its outlook for Moody's-rated steel companies in Asia through 2018 is stable, because profitability will be steady during this period, after improving significantly in 2017.
"The likely stable profitability for Asian steelmakers that we rate is underpinned by the removal of excess steel production capacity in China and broadly steady demand in Asia as a whole," Kai Hu, a Moody's senior vice-president said.
According to Moody's, steel production capacity in China will continue to decline, due to the Chinese government's supply-side reforms and environmental protection measures; factors which will reduce the supply glut in Asia. Moody's stated that China drives the outlook for steel companies in Asia because the country represents the region's largest steel consumer as well as producer.
Moody's report underlined that among major steel-producing Asian countries operating conditions will be the most supportive in India, because of robust domestic demand and protectionist measures, and despite an increase in raw material prices and new capacity.
Domestic demand will prove steady in Japan and South Korea, which, together with the steelmakers' efforts to cut costs and increase production of premium products, should keep earnings for companies in these two markets higher when compared with the levels seen in 2015-16.
