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Macro data for the eurozone countries is expected to fall further, as the region is expected to see only limited economic recovery in 2013 in light of government austerity measures, limited private sector investment and falling household spending.

The agency therefore keeps its negative outlook for the steel industry in Europe, and sees profitability worsening for key sector participants next year.

Moody’s expects lower steel prices to continue in the next 12 months, with hot rolled coil (HRC) in northern Europe expected to average €500 ($655) per tonne delivered and rarely push above €530.

“Our forecast reflects weak macroeconomic factors, low industry capacity utilisation, overproduction of steel in China, and the absence of upward pressure on steelmaking raw material prices,” the agency said.

On overcapacity, the credit rating specialist estimated current capacity utilisation in Europe to be 70%, making it difficult for companies to be profitable.

More plants must be closed to return the region to a healthy supply-demand situation, the agency said.

“If we factor in a rebound in demand, but also assume that an increasing proportion of European steel demand will be satisfied by imports, there is at least 30 million tonnes of excess capacity in Europe, roughly equivalent to Italy’s total production,” Moody’s argued.

In the end-user markets, the agency’s report expects the outlook to be poor, with further decline in demand in the construction sector on public spending cuts, and difficult investment conditions for the private market.

The automotive sector is also expected to decline as light vehicle sales are expected to be very weak, while commercial vehicle demand also looks soft and the outlook for capital goods and equipment manufacturing is similarly very negative.

However, Moody’s expects German distributor Kloeckner and Luxembourg-based stainless steel producer Aperam to buck the trend and report higher earnings before interest, taxes, depreciation and amortisation (Ebitda) in 2013.