Steel prices to retreat but remain elevated: Moody’s

Steel prices should notably retreat from their current record levels over the next two years, but remain above their historical averages in the medium term, says Moody’s. They will be underpinned by more solid demand and supply fundamentals and rising carbon costs on tightening emissions reduction policies in some regions, especially in Europe.

“Demand improvements should be driven by a continued recovery in steel-using end markets, such as (renewable energy) infrastructure and automotive, as Moody’s forecasts global light vehicle sales to reach pre-pandemic levels only by the middle of the decade,” the credit rating agency says in a note seen by Kallanish. “In addition, an expected re-stocking of still-low inventory levels globally should further fuel steel demand over the next few quarters.”

“The market environment benefits from structural improvements, as the recent prolongation and tightening of trade defence measures in Europe and the removal of value-added tax rebates on Chinese steel exports, should be supportive of more balanced international trade flows and limit the risk of excessively rising imports pressuring steel prices, as, for instance, seen in Europe in 2018,” it adds.

This comes as Moody’s assigned a Baa3 long term issuer rating to ArcelorMittal. It concurrently withdrew the Ba1 corporate family rating (CFR) and Ba1-PD probability of default rating (PDR), as per the rating agency’s practice for corporates transitioning to investment grade.

It also upgraded the senior unsecured rating on the group’s medium-term notes (MTN) programme to (P)Baa3 from (P)Ba1, the senior unsecured ratings to Baa3 from Ba1, the short-term rating on its Commercial Paper to P-3 from NP, and its other short-term rating to (P)P-3 from (P)NP. The outlook on all ratings has been changed to stable from positive.

The upgrade to Baa3 with a stable outlook reflects ArcelorMittal’s significantly strengthened operating performance and recovery in credit metrics over recent quarters and, in particular, in Q2, Moody’s concludes.

Adam Smith Germany