Cheap imports from China and Russia will continue to constrain European steel prices over the next year, according to a report from Moody's Investors Service.

As well as putting pressure on European prices, imports will also soak up "a fair share of the expected growth in steel demand", Moody's said.

This was based on the assumption that import levels from the steelmaking powerhouses will remain high next year, though the report noted their rate of growth should be slowed by recent European Union trade protection measures.

China recently slammed the EU's tariffs on some of its exports, dubbing them "reckless trade protectionism" and saying the organisation's investigation methods were "unfair".

A global steel glut caused in large part by a flood of Chinese exports has severely undercut European producers over the last few years.

Price volatility and rising raw materials prices will put added pressure on prices, keeping the outlook for the European steel industry negative over the next 12 to 18 months.

Steel demand in Europe is expected to grow by just one per cent overall, Moody's said, though growth will rise in the three main steel-purchasing industries of automotives, construction and capital goods, which includes items such as machinery.

Hubert Allemani, a Moody's vice president and author of the report, said:

The ongoing global and regional imbalance between supply and demand will continue to weigh on the sector and steel prices in 2017 with the risk of higher pressure on profitability.

The European steel sector continues to suffer from overcapacity and limited price negotiating power, particularly for the medium and smaller size mills.

At the end of last month, British Steel said it was on track to go from making million-pound losses to return to a profit in this financial year, while Tata Steel's Port Talbot plant has also reportedly swung back into the black over the summer.

 

Source : cityam.com

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