Focus: The world’s steel
Panorama sectors - Autumn 2012
In the framework of its economic reports, Coface is publishing its irst Panorama Sectors.
The report provides readers with a global sector barometer, analysing the situation of fourteen major economic sectors. The originality of the analysis is that it is based on aggregating the accounts of 6 000 companies in three of the world’s major regions: the European Union, North America and Emerging Asia, as well as with company payment behaviour recorded by Coface. There is an overview of each sector, with reference to three indicators pointing to the dynamism, inancial robustness and credit risk of the companies within it.
This Panorama also focuses on the development of global steel production, and, in particular, highlights the dominance of China, which, in the space of 10 years, has become not only the world’s leading producer but also the world’s irst consumer of steel. The inal section of this Panorama contains an analysis of the strengths and weaknesses of this major player. In the short term, China’s steel industry is weak. Overcapacity makes the companies in the sector -and at the same time their exposure to credit risk- all the more vulnerable to the global economic and the Chinese economic slowdowns. However, restructuring within the sector, which is part of the Chinese government’s long-term strategy, will strengthen the inancial viability of these companies and ensure the Middle Kingdom’s continued dominance of this key sector in the world’s economy.
The business sectors were hit by the global economic slowdown, with, however, marked differences depending on the geographic region business. Global turnover for allsectors was up 4%, relecting developmentsin international trade,which grew by 3.2%.This performance varies, however, depending on the sector: retail, metals, textile, all experienced real dificulties, in contrast to pharmaceuticals, which held steady. Meanwhile, there is a strong trend towards relocation of production and European Union demand to Emerging Asia.
Focus: The world’s steel
In ten years, China has come to dominate steel production, accounting now for 45% of world production.
Chinese steel. Consolidation that carries short-term risk
China’s steel industry has been hit hard by the slowdown in the Chinese economy and the sluggish growth of its main trading partners. The accounts have been strongly affected and the whole industry is having dificulty financing itself. Credit risk is particularly high, due to the current economic slowdown and industry restructuring. Nonetheless, due to the strategic nature of this industry, Chinese authorities have taken steps to reinvigorate the sector which will reinforce corporate robustness.