Moderate Growth For Steel despite Softening interest rates

India Ratings Maintain Steel Producers on Negative Outlook –

India Ratings & Research on Tuesday said it has maintained its rated steel producers on a negative outlook for 2015-16 despite softening of interest rates and expected growth in consuming industries.

The agency expects the credit profile of its rated steel producers to remain weak in next fiscal despite a modest recovery in demand. Majority (82 per cent) of ratings are on a stable outlook, with most of them being rated below β€˜IND BBB-β€˜ to reflect inherent risks in the steel sector.

The agency expects steel consuming sectors – construction, automobile and mechanical engineering to grow in 2015-16 with the softening of interest rates and implementation of government policies on the revival of infrastructure and investment in the country.

A better GDP forecast of 6.5 per cent growth in 2015-16 supported by industrial growth of 6.5 per cent would gradually increase steel demand in the country, India Ratings said in its report here.

Average prices for steel-making raw materials are likely to remain low in 2015, in line with 2014 as major global miners are determined to flush small, high-cost producers out of the industry and regain balance in the market.

The Indian iron ore mining industry is undergoing a difficult phase given regulatory intervention in various states. Even though this intervention bodes well for the domestic industry in the long-term, steel producers will continue to face inadequate availability of domestic iron ore in the short term, the report said.