Viewing the detritions in the fundamental business conditions in the U.S steel industry over the next 12 to 18 months, Moody's Investors Service has changed its rating from “Stable” to “Negative” for the US steel industry.
Import represents risk, as US steel demands are not enough to meet its sustainability over 12 to 18 months, viewed Moody.
Moody's says in the new report, "US Steel Industry Outlook Turns Negative on Weakening Fundamentals."
As manufacturing and industrial activity are slowing down the US Institute of Supply Management's Purchasing Management Index (PMI) has stayed just below 50 for each of the three months through August resulting in cumbers economic conditions. This will impact demand for steel.
Will The Steel Sector rebound? Find Out Here
Senior Credit Officer, Carol Cowan, and a Moody's Vice President said: "While capacity utilization levels remain above 70%, they have slowed since peaking in April 2012 and will likely continue at lower levels."
The sovereign debt and banking crisis in Europe and slow GDP growth in China, and increasing rate of steel imports in U.S are major reasons those has to be taken into consideration.
"While the increased import levels do not affect all areas of the industry equally, they continue to disrupt a market that has not yet returned to historical run rates," says Cowan. "With slowing demand globally, imports will remain problematic."
An increased reading of Purchasing Management Index above 55 and expectations for sustained capacity utilization above 80% could lead to a positive outlook, Moody's says.
AK Steel Holding Corporation(NYSE:AKS)slid 1% to $4.85, ArcelorMittal (ADR)(NYSE:MT) slid 1%, Steel Dynamics, Inc.(NASDAQ:STLD) down 0.50%, Nucor Corporation(NYSE:NUE) jumped 1% and United States Steel Corporation(NYSE:X) fell 1%.