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Ind-Ra revises steel sector outlook to 'stable-to-negative'

04 Sep 2019 Evaluate

Amid expectations of sluggish steel demand growth due to a mix of structural and cyclical concerns in auto and real estate construction, India Ratings and Research (Ind-Ra) has revised its outlook on the steel sector to 'stable-to-negative' from 'stable' for the rest of current financial year (FY20)  It has also revised downwards its FY20 steel demand growth expectation to about 4 percent from the earlier forecast of 7 percent.

According to the report, the outlook factors in increased import risks especially from Free Trade Agreement (FTA) countries like Japan and South Korea due to adverse domino impact of the slowing global growth and continuing trade frictions. It also believed that raw material availability and price risks may worsen in Q4 (Jan-Mar) of 2019-20 if the uncertainty over iron ore mine auctions extends.

However, Ind-Ra expects steel demand to recover in the second half of 2019-20, on the back of pick up in government investments, fiscal stimulus measures, improvement in market sentiment, among others. It further said that steel producers are likely to see moderation in cash flows from operations as strong margins moderate over FY20 from the highs of FY19. 

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