Nice Credit Rating "Steel Industry Market Environment Deteriorates... Profitability Expectations Should Be Lowered"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Domestic steelmakers are facing unfavorable market conditions in both demand and supply, leading to an analysis that profitability forecasts need to be revised downward.

Lee Young-gyu, Senior Researcher at NICE Credit Rating, stated at an online e-seminar on the 8th, "In the short term, unfavorable market conditions for domestic steelmakers will continue."

Lee explained, "The steel industry is expected to see further contraction in demand due to the poor outlook of major downstream industries combined with the impact of the novel coronavirus disease (COVID-19)."

He added, "In past similar infectious disease outbreaks, steel demand quickly recovered after the situation ended, but COVID-19 has spread globally faster than previous diseases, which may prolong the contraction in real economy demand."

Lee also diagnosed, "Since the second half of 2018, Chinese steelmakers have been increasing production, and due to the impact of COVID-19, steel inventories in China surged sharply in January and February this year, raising concerns about future supply increases."

Furthermore, he pointed out, "Considering the worsening profitability across the steel industry and the unfavorable market environment, it is necessary to conservatively adjust profitability forecasts."

NICE Credit Rating's long-term credit ratings for steelmakers are POSCO 'AA+' (Positive), Hyundai Steel 'AA' (Stable), SeAH Besteel, SeAH Changwon Specialty Steel, SeAH Steel 'A+' (Stable), and Hyundai Special Steel 'A-' (Stable).

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