INSUBCONTINENT EXCLUSIVE:
and inability to pass on higher costs to customers are pressuring the profitability of Asian steel producers, Moody's Investors Service
said on Wednesday while revising its outlook for the sector to "negative"."We expect steel producers' profitability -- as measured by
earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne -- will decline by around 15 per cent in the 12 months to
June 2020, following an 8 per cent drop in the 12 months to June 2019," said Chris Park, associate managing director in Moody's corporate
finance group.Prices of iron ore and coking coal, two key steelmaking inputs, have surged by more than 60 per cent and 20 per cent in the
They will likely stay high for some time, said Mr Park in the report.At the same time, weak demand in end-markets is limiting the ability of
producers to pass on these prices increases to customers, resulting in narrowing product spreads."Despite an uptick in demand from the
infrastructure sector, soft demand from the property and manufacturing industries will limit growth in steel demand in China, while demand
in South Korea and Japan will remain largely flat," added Kaustubh Chaubal, Moody's vice president and senior credit officer, and
co-author of the report."India's steel demand will remain the strongest in Asia but slow to mid-single-digit growth, as weak auto and
manufacturing demand offsets demand growth in the infrastructure and construction industries," said Mr Chaubal.Meanwhile, limited new
capacity additions across the region will curb a sharp decline in steel prices with production up only in India, where demand is still
growing, and flat in China, South Korea and Japan.Finally, Moody's expects the increase in US tariffs on steel imports will have a limited
direct impact on Asian steel companies because of their modest US sales
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