Steel producers in Asia will see their overall earnings in 2016 fall to levels even lower than the weak results reported in 2015 because production volumes and spreads will contract further, against the backdrop of oversupply and the resulting low prices, according to Moody's.
"Debt leverage for rated Asian steel producers in 2016 will remain high in 2016, after increasing significantly in 2015," says Jiming Zou, a Moody's Vice President and Senior Analyst. "Nevertheless, the levels in 2016 will likely fall year-over-year due to corporate austerity measures."
Zou points out that such expectations for the steel sector led to Moody's taking negative rating actions on most steel companies in recent weeks.
"As demand for steel in China declines further — against the backdrop of slower Chinese economic growth — the country's steel producers will continue to export their giant stockpiles of steel, pressuring prices in Asia," adds Zou. "Anti-dumping measures and safeguard duties will slow Chinese export growth, but overall volumes will remain high."
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