Moody’s: Covid-19 Increasingly Strengthens the Global Steel Industry

Widespread macroeconomic weakness due to the COVID-19 pandemic has reduced the demand for steel for the core industry.

Moody’s Investors Service estimates that the impact of the spread of the corona virus (COVID-19) will further pressure the steel industry globally. Meanwhile, a negative outlook for the steel industry has been pinned by Moody’s towards a number of countries since mid-2019.

Carol Cowan, Senior Vice President of Moody’s Investors Service, in her sector report received by Bisnis explained that the spread of the Covid-19 virus had worsened steelmaking operations in a world that had previously been fundamentally challenged.

“Widespread macroeconomic weakness due to the COVID-19 pandemic has reduced demand for steel for core industries such as manufacturing, automotive, construction, as well as oil and gas exploration,” Cowan wrote, Wednesday (07/08/2020).

Moody’s also stressed the negative outlook for the steel industry along with the continued weakening of the fundamentals due to the spread of COVID-19. Most recently, Moody’s cut the outlook for the steel industry in Russia and Brazil to negative.

Previously, this international debt rating agency has provided a negative outlook for the steel industry in the United States since October 2019, Europe since May 2019, and Asia since August 2019 due to fundamentals that are not strong.

The weakening of the steel industry called Cowan is also related to the challenges facing the automotive, construction and oil and gas driller industries.

He showed that the automotive sector which is one of the main market share of steel suppliers is now facing sales challenges.

Moody’s estimates global light vehicle sales will drop 14 percent by 2020 with US sales down at least 15 percent, Western Europe down 21 percent, Japan down 8 percent, and China down 10 percent.

Furthermore, demand for the oil and gas sector which also uses a lot of steel products is estimated to be increasingly contracted due to falling oil prices due to disputes between Saudi Arabia and Russia related to the level of production that has not found a bright spot.

Based on the forecast of world economic growth from Moody’s, the gross domestic product (GDP) of the world will contract in 2020. Then, in 2021 economic recovery will be seen in developed countries G20 members.

“For major steel consuming countries, we estimate US GDP of -2% percent, Eurozone -2.2 percent, China 3.3 percent, Brazil -1.6 percent, Russia 0.5 percent and Japan -2.4 percent , “Wrote Cowan.

Amid the pessimism of economic growth in a number of these countries, Cowan assessed that government support would slow down the pace of weakness.

He showed in the US through the US Central Bank (Federal Reserve) has issued a number of monetary policies and quantitative easing to face the decline in liquidity.

The policy a.l. purchase corporate-grade investment bonds, support lending, and strengthen the secondary market for credit.

“Other countries will follow that step. The European Central Bank [ECB] has announced an emergency program of bond purchases of 750 billion euros and is considering other options, “Cowan wrote.

 

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Widespread macroeconomic weakness due to the COVID-19 pandemic has reduced the demand for steel for the core industry.

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