Dec 12 - In its steel outlook published today, '2013 Outlook: U.S. Steel Producers,' Fitch Ratings highlights end-use trends, industry characteristics and producer profiles. Fitch expects further credit and operating improvements for U.S. steel producers in 2013 although downside risks from global overcapacity remains. Demand is slowly growing from the auto, energy, and heavy equipment manufacturing segments, while construction has bottomed out. Fitch expects steel demand to continue to grow albeit very slowly. The U.S. steel industry is challenged by low capacity utilization (about 75% on average in 2011) as a result of weak order rates. Margins are vulnerable when capacity utilization is below 80%, especially in a rising/high raw material cost environment. New capacity in flat-rolled steel may take upwards of 18 months to be absorbed. Fitch expects average capacity utilization to rise but not to exceed 80% on average in 2013. The rising share of raw materials costs to total costs has narrowed the gap between marginal and average costs. Producers expected to show a sustainable advantage include those with raw materials integration, depending on the cost position of captive capacity; producers with relatively high exposure to value-added steel products given premium pricing; and producers with substantial operating scale, which affords them the ability to temporarily curtail production during lulls to reduce costs while serving customer demand. The rating outlook for the U.S. steel industry is stable. Downside risks remain from the slow pace of capacity rationalization. Should the U.S. enter recession, destocking and very low capacity utilization could strain capital structures. Downside risks to growth expectations should result in conservative working capital management and capital spending in 2013.