Higher steel prices in Europe are predicted to improve the sector’s profitability into next year, but protectionist policies from the US could have an adverse effect, Moody’s has said.
The US-based global ratings agency predicted European steelmakers are set to benefit from increasing demand, while stable raw material prices and anti-dumping duties are expected to keep prices high.
Gianmarco Migliavacca, vice president and senior credit officer at Moody’s, said: “Keeping our outlook on the European steel sector stable reflects the expectation that steel consumption will grow by around 1.5-2% in 2017-18 on the back of improving economic prospects and demand growth from the automotive, construction and capital goods markets.”
The Moody’s report on European steel predicted the mills will remain below 85% capacity, which is within the Moody’s range for a stable sector. However structural over capacity combined with rising imports from countries including South Korea, Turkey and India – which are not subject to EU anti-dumping tariffs – are expected to constrain the sector.
Mergers and acquisitions are not expected to immediately reduce overcapacity.
Protectionism from the US could also threaten European steelmakers, especially if it causes countries that normally sell to the States to instead targeting European markets. The impact of US protectionism was “difficult to quantify but potentially large”, it said.
Since coming to power US president Donald Trump has tightened federal procurement “buy America” rules, and has demonstrated that he is not opposed to applying tariffs on imports to protect domestic businesses.
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