New Delhi, Aug 17 (PTI) Indian steel makers’ earnings will be stable or rise in the next 12 months on the back of rising domestic demand and protectionist measures, Moody’s Investors Service said today.
The rating agency said that it has changed the outlook for Asian steel industry to stable from negative on expectation that profitability will remain steady.
“We expect operating conditions in India to be the most supportive among major steel-producing Asian countries.
“The earnings of the two rated Indian steel companies will remain steady (JSW Steel) or increase significantly (Tata Steel) during the coming 12 months, owing to robust domestic demand and protectionist measures,” the rating agency said in a statement.
It said Indian steel makers’ earnings will be stable or rise in the next 12 months amid the country’s rising demand and its protectionist measures.
This expectation comes despite an increase in raw material prices and higher production volumes arising from new capacity additions, it added.
Healthy GDP growth of 7.5-7.8 per cent during 2017 and 2018 as well as the Indian government’s measures related to fiscal stimulus and rising infrastructure spending will underpin the demand, the statement said.
“For Tata Steel, the ramp-up of its 3 million tonnes of production capacity, which was completed in 2016, supports our expectation that EBITDA for the company s Indian operations will increase by almost a third year on year in the current fiscal year, which ends on 31 March 2018,” it added.
The agency has changed the outlook for the Asian steel industry to stable from negative on the expectation that profitability will remain steady.
Chris Park, an Associate Managing Director said the rating agency has changed the outlook primarily because it expected the profitability of rated Asian steel companies — measured by EBITDA per tonne — to remain stable during the coming 12 months following a significant improvement that began in the second half of 2016.
The agency said the steel demand will remain stable despite China’s slowing property sector and added demand will stay steady in Japan and Korea. However, it said Chinese steel makers’ profitability will decline slightly in 2017 following a strong H2 2016.
The agency expected Asian steel demand to remain broadly stable in the next 12 months because of continued robust demand growth in South and Southeast Asia.
“We expect China’s apparent steel demand to grow by about 2.5 per cent this year, similar to the growth in 2016, and to be largely flat in 2018. China’s steel production grew 4.3 per cent year on year during the first six months of 2017, underpinned by robust demand from the country s infrastructure and property sectors,” it said.
This is published unedited from the PTI feed.