Fitch Ratings' Predicts Sluggish Growth in Steel

   NEW YORK -(BUSINESS WIRE) - 7/14/2011 - Fitch Ratings' expects slower growth in steel demand and production during the second half of 2011 as developing nations fight inflation and developed nations address fiscal instability. A positive result from lower growth expectations is slowing capacity addition; global average capacity utilization at 81 percent.
    Fitch believes tight supply of low-cost iron ore and metallurgical coal will persist into 2013 resulting in raw materials prices that should exceed 2010 levels for the period. Attractive returns on iron ore and metallurgical coal projects and the benefits from backward integration for steel producers should continue to drive merger and acquisitions activity.
    Steel producers expected to show a sustainable advantage include: 1) those with raw materials integration depending on the cost position of captive capacity; 2) producers with relatively high exposure to value-added steel products given premium pricing; and 3) producers with substantial operating scale, affording the ability to temporarily curtail production during lulls to reduce costs while serving customer demand.
    Fitch expects mining and metals producers to remain disciplined through the recovery and not stretch their investment targets or their capital structure to mitigate systematic risk and geopolitical risk.
    The Rating Outlook for the global steel and steel raw materials industry sectors is Stable, with an expectation that the recovery for steel will stretch into 2013. Fitch also anticipates a soft landing for China and a slow economic recovery for developed nations.
    The full reports 'Worldwide Steel Outlook' and 'Steel raw Materials Outlook' are available on Fitch's website at 'www.fitchratings.com.'

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