Fitch Ratings said that the demand for steel should rebound modestly over the next year to 18 months. It added that the industry should be able to pass along higher raw materials costs but further price hikes will be constrained by excess capacity.
Fitch Ratings, in its "Worldwide Steel Outlook" report, said that regional differences in steel markets also will influence profitability and cash flow for producers next year.
Ms Monica Bonar director of Fitch said that 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. He added that "These measures should serve well over this period of slow recovery, and financial leverage should decline over the year. Ratings remain under pressure given the severity of the downturn and limited visibility on the recovery."
Fitch said that 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% to 20% higher next year.