S&P vient d'émettre une brève analyse sur le secteur des métaux de base et précieux.
Mixed Outlook for Metals and Mining Sectors Following Terrorist Attacks
Thomas Watters, New York (1) 212-438-7818;Paul Vastola, New York (1) 212-438-7816;Mary Lue S Bill, Toronto (1) 416-202-6011;Olivier Beroud, London (44) 20-7826-3508
NEW YORK (Standard & Poor's) Sept. 21, 2001--The near-term outlook for credit quality in the global steel and base metals industries remains decidedly negative in the wake of the recent terrorist attacks in the U.S. This, in large part is because of the expected deterioration in economic conditions in key regions, which will extend the weakness in demand and resulting degradation in credit quality experienced over the past year or so. Most of these sectors have already endured cyclical downturns that have eroded financial profiles. However, Standard & Poor's does not anticipate a spate of rating actions in the very near term. Standard & Poor's will continue to assess pricing and volume trends and other business fundamentals in these sectors and evaluate the tactical and strategic decisions made by individual companies to counter the ill effects of the expected slowdown. In contrast, the precious metals and coal sectors of the metals & mining industry should be relatively unaffected by recent events.
The expected recession will further hinder the North American and European steel industries, because an extended deterioration of already dismal business conditions will increase the strain on steel companies' profitability and financial flexibility. Twelve of the 21 rated North American steel companies have negative outlooks or are on CreditWatch with negative implications. The industry has been suffering from near record low selling prices because of oversupply conditions, poor demand from a sluggish U.S. economy, and high fixed costs. As a result of these conditions, 18 domestic steel companies have filed for bankruptcy protection over the past two years. Standard & Poor's had anticipated that the U.S. economy and the cyclical steel industry would remain at current pricing and demand levels or slightly weaker through the remainder of 2001, with a rebound expected some time during mid-2002. Now, Standard & Poor's believes that already waning consumer confidence levels in the U.S could decrease some more, further weakening demand from the key automotive, construction and consumer durables sectors. Several companies currently have very limited liquidity and need to obtain some additional financing in the near term or they will be downgraded, including Bethlehem Steel Corp., National Steel Corp., and Weirton Steel Corp..
Similarly, the generally weak pricing levels that are prevalent in the base metal sector (particularly aluminum, copper, nickel and zinc) are expected to continue over the near term and could possibly decrease further, leading to additional deterioration of credit quality for base metal companies. Eight of the 15 rated North American companies have negative outlooks or are on CreditWatch with negative implications. Companies that lack strong balance sheets and have limited diversification and financial flexibility are most vulnerable to further negative rating actions. Across the base metal spectrum, the existing economic malaise and concerns about the economic outlook--both real and perceived--has lead to rising inventory levels and persistent low prices. Now, further declines in domestic demand appear inevitable. Furthermore, the probability of a global recession has increased. Without significant cuts in production, inventory levels are expected to continue to rise with pricing for the near term now expected to be exceptionally weak for at least the next two to three quarters. The likelihood for improvement beyond that is uncertain.
In contrast, the outlook for ratings on precious metals (primarily gold) companies seems to have improved somewhat, although not enough to have a positive ratings impact on any company. The credit quality of gold companies exposed to spot prices over the past few years has deteriorated given the decline in gold prices and the inability of gold to sustain a $270 price level for any length of time. Weak global economic conditions, central bank selling, a lack of inflation in the western world and investors seeking higher returns through other financial instruments, fueled the decline in prices and capped any upside potential for pricing. Over the past few years, companies that have not had a strong hedge book, a low cost diversified mining profile, or good financial flexibility, have suffered a deterioration of their credit quality and thus rating downgrades.
Following the events of September 11th, gold exhibited its "flight to safety" characteristic, rebounding from a closing price of $271.60 the previous day to close at $290 per ounce as of Sept. 20, 2001. A protracted period of political instability regarding events in the Middle East could continue to sustain a gold price at this level, if not higher. However, the extent, duration, and severity of this crisis and its effect of gold prices is unclear. In the event of a peaceful resolution, a global economic slowdown, which appears likely, could adversely affect demand and lead to a retreat in gold pricing and thus a negative outlook for credit quality on non-hedged precious metals companies.
The credit quality of coal companies has continued to improve following a recent sharp rebound in coal prices. Opportunistic coal companies have issued equity, reduced debt, and locked in favorable long-term prices on expiring contracts. Standard & Poor's recently upgraded Arch Coal Inc.'s rating to double-'B'-plus with a positive outlook from double-'B' and Peabody Energy to a double-'B' with a stable outlook from double-'B'-minus. The rise in coal prices has been fueled in part by: favorable weather patterns that reduced coal utility stockpiles; production and inventory shortages resulting from the elimination of inefficient coal production and regulatory issues that have made it difficult to obtain environmental permits in the east; and, higher natural gas prices, which lead to increased demand among utilities for coal. Although Standard & Poor's does not expect current coal pricing to be sustained for the long term, spot coal prices over the medium-term should be measurably higher than the low levels that were reached early last year. The wild card in the outlook for coal prices is the degree and severity of a U.S. economic recession, which could lead to lower electricity usage and thus softer demand for coal. |
