According to Fitch Ratings in new report strong earnings, cash flows and credit improvements will continue for steel raw materials miners in 2012. This despite a softer pricing environment compared to first half-2011.

Worldwide steel production should grow 3% to 5% in 2012 with China accounting for nearly 50% of production. Fitch expects steel raw materials prices to be volatile and remain below 2011 peaks but above 2010 levels in 2012. Fitch expects prices to be above marginal costs, affording healthy margins even if the global economy returns to recession. Destocking, weather events and/or labor actions could disrupt shipments and affect prices, earnings and cash flow over the short term.

Strong cash generation in 2010 and 2011 and resilient margin expectations have resulted in larger capital budgets and, in some cases, higher dividends and share repurchases. Fitch does not expect miners to stretch their capital structures or liquidity in 2012 given the eurozone financial crisis, a possible soft patch in the US recovery and risks of a hard landing in China. Fitch anticipates that steel demand in developed nations will not reach full recovery until 2013 at the earliest.

Fitch has a Stable Rating Outlook for the steel raw materials industry.

(Sourced from www.fitchratings.com)