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Korean steelmakers to suffer lower demand on virus impact: Moody's

All News 14:43 April 08, 2020

SEOUL, April 8 (Yonhap) -- Moody's Investors Service said Wednesday that South Korean steelmakers will suffer a sharp decline in demand and prices due to the growing coronavirus impact on the steel and related industries.

"In Korea, we expect domestic and export demand will fall dramatically, reflecting lower auto production and sluggish housing construction. The rated steelmakers in Korea have high exposure to the auto sector and are therefore vulnerable to declining auto production," Moody's said in a report.

Local steelmakers, such as POSCO, Hyundai Steel Co. and Dongkuk Steel Mill Co., have suffered weaker demand from construction firms and shipbuilders since the 2008 financial crisis.

They now face weak demand from the auto sector as well due to the COVID-19 outbreak.

On the supply side, steelmakers will cut production but not to an extent sufficient to curb oversupply. Steel inventory buildup is likely, given the weak end markets and difficulty in drastically reducing blast furnace utilization, the report said.

"Given these factors, along with weaker distribution prices in China and elevated steel inventory levels, prices and spreads should fall further over the next three months or so," it said.

This photo, taken on June 30, 2019, shows steel wire products at POSCO's integrated steel mill in Pohang, about 370 kilometers south of Seoul. (Yonhap)


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