The steel industry in Europe is rebounding, and producers are expected to have increased profits during the next 12 months, said Moody’s Investors Service. The ratings agency also changed the European steel sector outlook from negative to stable. The change in rating is due to the “expectations for the fundamental business conditions in the industry over the next 12 to 18 months,” Moody’s analysts said.
Steel prices and industrial output in the European Union is expected to improve in the next year, but there could be a slight decline in prices in the “second half of this year because of a retreat in the cost of raw materials and seasonality,” said Hubert Allemani, a senior analyst and vice president with Moody’s. "Steel prices have remained at three-year highs since the strong rebound in the first quarter of 2016, alleviating concerns about how long the recovery would last."
Steel making is expected to be supported by demand from car manufacturers and the construction industry, which is Europe’s largest steel-using sector. Imported steel will still have an effect on European steel makers. “[China has] far too much capacity and will be trying to unload as much as they can on the U.S. and Europe,” said NACM Economist Chris Kuehl, Ph.D. The expected demand growth will be less than 2%, according to Moody’s.
Better prices between steel makers and their clients from a year ago are expected to help results for the first half of this year. “Together with improved consumer confidence, manufacturing in the eurozone has gained momentum and the strengthening of industrial activity should support demand for steel,” Moody’s said.
– Michael Miller, editorial associate