Moody's Investors Service has retained its stable outlook for the European steel sector despite the global economic slowdown, since improved pricing power means firms can pass on higher costs to customers.
Moody's Investors Service in a statement said that the outlook represents Moody's forecast of fundamental credit conditions in the sector over the next 12 to 18 months. It said that "Strong overall global demand has supported pricing in the region since 2007 and especially since the beginning of Q2 2008.”
Companies have been able to boost prices as a result of industry consolidation and high capacity utilization.
Moody's said that "Even weaknesses in the US construction and automotive industries have not prevented steel prices in North America from rising, mainly because of a sharp reduction in steel imports from China and other markets into North America."
It said that vertically diversified firms such as ArcelorMittal and steel groups in the Commonwealth of Independent States, such as Evraz, Severstal and NLMK are expected to perform relatively well during the rest of 2008 and the first half of 2009.
It added that "The industry's overall liquidity will probably remain solid, reflecting both the strong cash flow generation ability of steel companies and their ability to secure alternative funding."
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