(The following statement was released by the rating agency)
July 16 - Fitch Ratings highlights in a new report that demand for steel will remain depressed across Europe in H212. Non-integrated steel producers will be particularly affected by high raw material costs and lower steel prices for the remainder of 2012. Fitch expects continuing negative pressure on market conditions and economic growth in developed markets (notably the eurozone) to continue to depress demand for both long and flat products to end-2012.
Steel prices continued their fall in H112, and remain depressed close to the recent lows of Q411. Fitch expects the steel price to have limited upside in the rest of 2012, with steel producers unable to pass on significant price increases in continuing weak demand conditions.
There was significant margin erosion across the steel sector in H112, and Fitch expects H212 to remain challenging as global production capacity utilisation remains low, at 81.1%, according to Worldsteel. Fitch forecasts high raw material input prices, notably iron ore and coking coal, to exacerbate margin erosion in 2012. This will limit the financial flexibility of non-integrated steel companies in particular.
The full report, ''2012 Mid-Year Outlook: European Steel" is available at fitchratings.com.
Link to Fitch Ratings' Report: 2012 Mid-Year Outlook: European Steel