By The Associated Press
Tuesday, December 15, 2009
The demand for steel should rebound modestly over the next year to 18 months, Fitch Ratings said Tuesday.
The industry should be able to pass along higher raw materials costs but further price hikes will be constrained by excess capacity, Fitch said.
Regional differences in steel markets also will influence profitability and cash flow for producers next year, the agency concluded in its "Worldwide Steel Outlook" report.
Most companies that are rated by Fitch showed improvement in liquidity this year through cost reductions, working capital management, credit facility amendments and other factors, said Monica Bonar, Fitch director.
"These measures should serve well over this period of slow recovery, and financial leverage should decline over the year," Bonar said in a statement. "Ratings remain under pressure given the severity of the downturn and limited visibility on the recovery."
Fitch said the industry's performance in the first six months of 2010 should be an indicator of how strong the recovery will be. Prices of raw materials are expected to be 15 percent to 20 percent higher next year.
Chinese demand will grow in 2010 but will be affected by larger-than-normal increases in capacity, which will contribute to limits on price appreciation, Fitch said.
In addition, more Chinese steel producers are likely to invest in a low-cost raw material supply, Fitch said.
In afternoon trading, shares of major metals manufacturers were mixed.
Shares of Alcoa Inc. fell 11 cents to $14.71 and Century Aluminum Co. was down 15 cents to $13.28. Shares of Nucor Corp. rose 49 cents to $43.32 and United States Steel Corp. rose 25 cents to $48.90.