The U.S. steel and metals sector is stable overall, according to the latest Market Monitor from credit insurer Atradius. The demand for U.S. steel is expected to increase by roughly 3% in 2017 and 2018, following a nearly 5% decline in 2016.
“While the overall financial and credit conditions are generally stable, steel/metals companies still must be financially very viable in order to obtain their preferred lending terms and interest rates,” said Atradius. Since the second half of last year, steel prices have rebounded. There was a profit margin deterioration in 2015 and the first half of 2016 due to the lower cost of imported steel and a drop in demand from the oil and gas sector.
Overall, payment delays and defaults have stabilized. Payments on average take from 30 to 45 days domestically and 60 to 90 internationally. Industry insolvencies are not expected to rise much this year and next year. “However, an increase in both payment delays and business failures in Puerto Rico and the area around Houston with its large oil industry cannot be ruled out,” said the market watch report. This is due to the recent hurricanes to make landfall.
The possibility of a major infrastructure plan “would certainly help the sector,” said Atradius. This was one of three strengths for the industry, along with lower insolvencies and a businesses’ stable financial situation. International trade wars and increasing competition were among the weaknesses.
Atradius also reviewed the steel industry in other countries, including China, Germany, the U.K. and India.
– Michael Miller, editorial associate