International credit ratings agency Standard & Poor's Ratings Services has announced that it has affirmed the South Korea-based steelmaker
Hyundai Steel's long-term corporate credit as 'BBB-', keeping the outlook at stable.
The agency stated that the rating affirmation reflects the expectation that a strong likelihood of support from its parent
Hyundai Motor Group will offset deterioration in the financial risk profile for
Hyundai Steel over the next 12-18 months. The financial risk profile is expected to deteriorate until 2013 as a result of
Hyundai Steel's investment in a new blast furnace, but it is expected to recover from 2014 when the blast furnace is due to commence operation.
According to S&P's estimates, the fall in
Hyundai Steel's profitability in 2012 is likely to be modest, given lower volatility in long steel prices, as a result of the company's strong position in the domestic market, and a steep decline in raw material prices. The company's profitability is expected to continue to fall in 2013 because of a continuing oversupply of steel in the region.
Additionally,
Hyundai Steel's new blast furnace investment strengthens steel-auto integration in the group.
Hyundai Motor Group is likely to consume 33 percent of
Hyundai Steel's total crude steel production by 2014, up from 23 percent in 2011 and 16 percent in 2010. Also, the group is likely to depend on the company for 56 percent of its automotive steel needs by 2014, from 33 percent in 2011 and 19 percent in 2010.