October Steel Price Forecast: Firms Affected by Stagnant Pricing

by Kyle Fitzsimmons on OCTOBER 28, 2015

JSW Steel Ltd. has seen its outlook downgraded from stable to negative by Moody’s Investors Service, due in part to the steep drop in steel prices and the impact those reduced prices will have on the company’s credit profile.

“Our change in the rating outlook to negative from stable has been prompted by the continuing deterioration in steel prices because of cheaper imports and expectations of only a modest recovery,” said Kaustubh Chaubal, Moody’s Vice President and Senior Analyst.

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JSW can boost domestic sales by diverting export volumes to the Indian market in addition to through its retail network, but the sharp decline in steel prices is already putting pressure on its credit metrics.

In addition to JSW, other steel firms have taken a hit due to tumbling commodity prices, including AK Steel Corp. Merrill Lynch downgraded AK Steel to an Underperform rating from Neutral while lowering its price target to $1 from $4. This change was made mostly due to lower forecast steel prices in the near future and into 2016.

“Although AK Steel has no maturities until late 2018, Merrill Lynch sees challenged operations and little breathing room so long as benchmark steel prices remain low,” wrote Chris Lange for 24/7 Wall St. “Another threat would be any pressure to its non-nickel bearing stainless or electrical steel sales, which the firm believes have been protected by annual contracts.”

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