Asian steel companies to remain stable in 2019

Overall profitability for Asian steelmakers will remain strong in 2019 despite softening demand, Moody's Investors Service said in a statement.

In its latest report, the 2019 Asia Steel Outlook, Moody's said its outlook for the steel industry in Asia in 2019 was stable, based on an assessment of relatively stable margins for steel companies over the next 12 months.

“Next year, steel demand in Asia is likely to remain in line with 2018, suggesting robust growth is expected in 2018,” said Moody's vice president and senior credit director Kaustubh Chaubal.

In terms of margins, the ratings of Asian steelmakers will see their margins weaken slightly due to lower demand growth in China, but remain strong overall, he said.

Moody's says strong margins are backed by robust demand in South and Southeast Asia, as well as China's capacity cuts and tough environmental measures.

The Chinese steel industry is driving the outlook for the sector in Asia, as China is by far the region's largest steel customer and producer.

“Our 2019 outlook for steel demand in China reflects higher infrastructure spending, which limits the negative impact of the ongoing Sino-US trade dispute and slows growth in real estate investment in China,” said Moody's Senior Vice President Kai Hu.

An escalating trade dispute between China and the United States will have a limited impact on Asian steel demand, given the moderate indirect impact across supply chains and managed direct macro management, Moody's said in a statement.

However, the side effects could be more significant, and potential US tariffs on imported cars pose key risks for Japanese and Korean steelmakers.