Fitch: Pricing may weaken steel makers

Fitch Ratings said that the change in global iron ore pricing to a quarterly-based pricing system from an annual benchmark negotiation could weaken the credit profiles of flat steel manufacturers that are reliant on seaborne iron ore imports.

These companies traditionally sell their products on a long-term contract basis to industries, such as the auto sector, that are still experiencing subdued demand for their products.

The change in the pricing system is likely to be credit negative for steel producers with no raw material self-sufficiency, higher cost bases and greater exposure to discretionary consumer products, such as Nippon Steel, JFE Holdings and Thyssen Krupp AG. These companies have a high exposure to flat products, which are mostly used as input for the manufacturing of consumer items, Fitch said.

Steelmakers with a high portion of self-sufficiency in ore such as the NLMK, Severstal, Evraz and Metinvest should not be materially impacted on the cost side, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.