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Fitch Ratings 2021 Outlook: China Steel

Fitch’s Sector Outlook: Stable Fitch Ratings expects the overall dynamics of the Chinese steel sector to remain stable as production and apparent consumption growth will remain flat. Growth rates will be bolstered in 1H21 by the low base in 1Q20 during the strictest lockdowns following the COVID-19 outbreak. Chinese steelmakers are likely to generate free cash flow on the back of higher revenue and profit, and steady capex, which will result in lower leverage industry wide. Rating Outlook: Stable Fitch expects limited rating changes for the sector in 2021, as most of the rated issuers are either state-owned enterprises (SOEs) or subsidiaries of SOEs that are rated under our Government-Related Entities Rating Criteria, with their ratings directly or indirectly linked to their respective government owners. For those that are rated on a standalone basis, rating headroom remains high with improving market conditions and their lower leverage than international rated peers. Rating Distribution Weighting: Investment Grade Most Fitch-rated Chinese steel companies are investment grade as they are either rated using a top-down approach from their government owners under the Government-Related Entities Rating Criteria or with their ratings linked to their respective government-linked parents under the Parent Subsidiary Linkage Rating Criteria.
Source: Fitch Ratings

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