TEXT-S&P Report Says China's Metals Sector Faces A Profit Slump
SINGAPORE (Standard & Poor's) Sept. 5, 2012--Falling commodity prices and demand, overcapacity, and the high cost of production for some metals will exacerbate the impact of China's slowdown on the metals sector, Standard & Poor's Ratings Services said in a report published recently. The report titled, "China Credit Spotlight: Metals And Mining To Suffer But Oil And Gas Remain Robust", highlights that the steel sector would be significantly affected.
"Large Chinese steel companies are losing money this year for the first time in 10 years, even though steel production is still at a record high. Overcapacity, lack of product differentiation, market fragmentation, and slowing demand will likely keep steel prices soft and could easily depress them further," Standard & Poor's credit analyst Suzanne Smith said. "We expect weak margins to erode the profitability of China's steel sector over the next couple of years."
On the other hand, we expect strong energy demand will sustain robust fundamentals in China's coal, oil, and gas industries.
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