Ind-Ra Foresees Near-Term Downside Risks to Global Steel Sector

The receding Chinese steel demand is feared to lead to inventory pile-up and pricing pressures.

SEATTLE (Scrap Monster): Ind-Ra, the ratings agency foresees downside risks to global steel sector in the near-term, following outbreak of coronavirus threat to increasing number of countries around the world.

According to the ratings agency, the Indian companies are likely to face pricing pressure of around $30 per tonne in April-June quarter of the current year. The steel companies in the country may see squeezed margins going forward. The magnitude of the impact depends on the spread of the virus to other parts of the world. It must be noted that operating margins of Indian steel companies are already under pressure on account of modest domestic steel prices, Ind-Ra report said.

The receding Chinese steel demand is feared to lead to inventory pile-up and pricing pressures. The drastic decline in local steel demand has resulted in Chinese steel inventories surge higher by almost 20% in the year-to-date period in 2020, as compared with 2019. The spread of virus to other major steel producing countries such as Japan, South Korea, India and the U.S. could tilt the global supply-demand balance.

ALSO READ: India's Steel Sector to Witness Higher Gross Spreads

The spread of the virus to more countries could have an imp0act on steel prices even in the second half of the current year, Ind-Ra noted.

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