INDUSTRY NEWS
Moody’s: Europe’s steel sector to remain stable for 2016
T
he outlook for the European steel sector will remain stable over the next 12 months as
continued growth in the main steel using end markets and improving regional economic growth prospects will support steel demand in Europe, says Moody’s Investors Service in a report published today. However, high pressure on prices could lead to outlook for Russian steelmakers is more negative with the country in continued recession.
Moody’s report, titled “Steel -- Europe and CIS: Stable Outlook Constrained by Low Prices”, is available on
www.moodys.com. “Our outlook for the European
steel sector over the next year remains within our stable range as we expect sustained demand from the auto, construction and consumer goods industries. Brighter economic growth prospects in Western Europe are also set to mitigate further anticipated price falls as a result of cheap Chinese imports and oversupply in Italy,” says Hubert Allemani, a Moody’s Vice President -- Senior Analyst and author of the report.
The Markit Eurozone Composite Output Purchasing Managers’ Index (PMI) is between 50 and 55 (a level of above 50 indicates expansion) and the capacity utilisation rate for the region is within the stable range of 75% to 85%. These indicators are some of
a stable outlook and both are comfortably in the rating agency’s stable range.
There are no signs that PMI would start to decrease to a level close to or under 50, even if the fallout from Volkswagen Aktiengesellschaft’s (A2 negative) the German automotive sector and Germany’s GDP in coming quarters. ArcelorMittal (Ba1 negative), SSAB AB (not rated), Tata Steel UK Holdings Limited (B2 positive) and smaller mills producing lower- grade steel, long products or semi- S.A. (Caa2 stable) are facing price pressure from cheap Chinese imports. Other more specialised steel manufacturers, such as
Ovako Group AB (B3 stable) and SCHMOLZ + BICKENBACH AG (B2 by the price declines due to their focus on engineered or alloy steel. The situation for steelmakers in Russia, which is in recession, is much weaker but sustainable. Manufacturing PMI has been contraction) since December 2014 because of declining GDP and the weaker rouble’s pressure on prices. However, Russian steelmakers are competitive in export markets and their average capacity utilisation has remained high above 80%. Falling steel prices have less of an impact for Russian steelmakers, because their cost bases are typically lower than those of their European peers.
2
IMT December 2015/January 2016
www.internationalmetaltube.com
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