LONDON (Reuters) - European steelmakers’ profits will peak this year before softening next year, but not back to levels seen in 2016 when the market was recovering from a crisis, Moody’s Investor Services said on Tuesday.
The ratings agency kept its ‘stable’ outlook on the sector, in place since April.
It sees sustained profits for the sector as spreads - the difference between steel prices and raw material costs - remain above levels seen in 2016 amidst a supportive operating environment.
Steel consumption in Europe will grow 2 percent this year and 1.5 percent next year, thanks to demand from the auto, construction and capital goods sectors, Moody’s said in a report.
However, it said steel imports account for 17 percent of European domestic demand as anti-dumping duties imposed so far have had little effect, especially on lower grade commoditised steels.
This means steelmakers continue to operate with high levels of spare capacity, and Moody’s does not expect the planned Tata Steel Europe (TISC.NS)-Thyssenkrupp (TKAG.DE) merger will help address this until after 2020.
European steel prices have risen 77 percent since hitting 12-year lows in January last year, according to Metal Bulletin ST-MBEUDNHRC-MB.
Reporting by Maytaal Angel; Editing by Susan Fenton