Global outlook for steel industry turns stable from negative : Moody’s

Global demand for steel is picking up as pandemic-related lockdowns have eased and industries are resuming production, turning their outlook to stable from negative, says Moody’s Investors Service.

“Demand for steel is improving on a resumption of production in important end markets and on stronger global economic data, particularly in China,” said Carol Cowan, a Moody’s Senior Vice President.

“We expect operating conditions for steelmakers to continue to improve over the next 12 to 18 months, barring a resurgence of the coronavirus.”

The construction sector, which is the largest consumer of steel, has remained resilient throughout the pandemic and even picked up in countries with infrastructure-focused stimulus programs, such as China. However, decreasing backlogs and declining new bids are risks for the construction industry in 2021.

In steelmakers’ key end markets, purchasing manager indexes (PMIs) are rising from low levels, with the US, Eurozone and China respectively now above 50, indicating expansion. 

However, Moody’s forecasts a 4.6% contraction in G-20 economies in 2020, but growth will rebound to  5.3% next year. Many important steel-consuming regions will follow a similar pattern, with the exception of China, which will see GDP grow by 1.9% in 2020 and by 7.0% in 2021.

Capacity utilization is improving but remains well below pre-pandemic levels as the recovery lags in some regions and sectors, Moody’s says.

The rating agency’s outlook for main steel-consuming industries including automotive, chemicals,  oil and gas including exploration and production, as well as global manufacturing have all moved to stable from negative, except for oilfield services and drilling.

Despite a recent price plunge and demand in the US, sector fundamentals have begun to strengthen with capacity utilization rising to match increased demand, particularly from automakers that are ramping up production after coronavirus-related restrictions resulted in shutdowns of about 2 months earlier this year.

Leave a Reply

Your email address will not be published. Required fields are marked *