Moody’s signals negative outlook for EU steel market

Moody’s foresees a negative outlook for the European steel sector in 2020, the company says in a presentation sent to Kallanish. The rating agency notes that the outlook could change only if fundamentals for the continent’s economy perform better than expected and margins for steelmakers improve further.

Moody’s expects the slower economic growth and persistent weak demand from key steel-using markets to continue to weigh on the sector. The firm notes that particularly slow automotive demand will weigh on steelmakers’ capacity utilisation.

In addition to soft underlying demand indicators, trade tensions and Brexit uncertainty continue to be major risks for the sector. Moody’s also added that imports will continue to absorb a “… decent” share of the demand, though volumes have fallen in 2019 compared with 2018.

One of the biggest issues for the market will remain profitability of European steelmakers. “We expect steel spreads in Europe to remain at depressed levels with some potential for stabilisation or slight recovery during 2020. Profitability of steel producers will only gradually improve,” Moody’s says.

The rating agency lowered the outlook for ArcelorMittal to negative in November this year. The outlook is stable for thyssenkrupp it says, even though the steelmaker was downgraded slightly in August 2019.