Moody’s revises outlook on steel to stable

Our Bureau Mumbai | Updated on October 08, 2020

Moody’s Investors Service has revised its outlook on the global steel industry to stable from negative on the back of pick-up in demand after the Covid-related lockdowns worldwide.

Though a virus resurgence is still a key risk for steel-makers, supporting industries have resumed production as different countries ease restrictions imposed to curb the spread of Covid-19.

“Demand for steel is improving on a resumption of production in important markets and on stronger global economic data, particularly in China,” said Carol Cowan, Senior Vice-President, Moody’s.

“We expect operating conditions for steel makers to continue to improve over the next 12-18 months, barring a resurgence of the coronavirus,” he added.

After pandemic-related shutdowns, production is now ramping up in the automotive and industrial sectors, said Cowan.

Meanwhile, the construction sector, the largest consumer of steel worldwide, has remained resilient throughout the pandemic and even picked up in countries with infrastructure-focussed stimulus programmes, such as those in China. However, decreasing backlogs and declining new bids are risks for the construction industry in 2021.

In steel-makers’ key end markets, purchasing manager indices (PMIs) are rising from low levels and hovering above 50 in the US, eurozone and China, an indication of economic activity. And while Moody’s macroeconomic board forecasts a 4.6 per cent contraction in G-20 economies in 2020, it expects 5.3 per cent growth in 2021.

Many important steel-consuming regions will follow a similar pattern, with the exception of China, which will see GDP grow by 1.9 per cent in 2020 and by 7 per cent in 2021, it said.

Capacity utilisation is improving but remains well below pre-pandemic levels as the recovery lags in some regions and sectors, Moody’s said.

Published on October 08, 2020

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