EU steelmakers profits to peak this year, then soften slightly: Moodys

European steelmakers` profits will peak this year before softening next year, but not back to levels seen in 2016 when the market was recovering from a crisis, Moody`s Investor Services said on Tuesday.

The ratings agency kept its `stable` outlook on the sector, in place since April.

It sees sustained profits for the sector as spreads - the difference between steel prices and raw material costs - remain above levels seen in 2016 amidst a supportive operating environment.

Steel consumption in Europe will grow 2 percent this year and 1.5 percent next year, thanks to demand from the auto, construction and capital goods sectors, Moody`s said in a report.

However, it said steel imports account for 17 percent of European domestic demand as anti-dumping duties imposed so far have had little effect, especially on lower grade commoditised steels.

This means steelmakers continue to operate with high levels of spare capacity, and Moody`s does not expect the planned Tata Steel Europe -Thyssenkrupp merger will help address this until after 2020.

European steel prices have risen 77 percent since hitting 12-year lows in January last year, according to Metal Bulletin .

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