Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Credit rating agencies S&P Global and Moody Investor Services (Moody’s) have revised their rating outlook for Tata Steel on the back of COVID-19 disruptions. 

S&P Global

S&P has revised its outlook for the steelmaker from “BB-” to “B+”, according to a press release shared by Tata Steel. The downgrade was driven by a risk of weakening credit profile the company faces should the effect of lower commodity prices and economic fallout continue. S&P has also lowered its outlook for Tata Steel subsidiaries Tata Steel UK and ABJA Investment from “B+” to “B” and “B+” from ‘‘BB-“, respectively.

The agency states Tata Steel’s earnings in the first nine months of fiscal 2020 (April-December) had underperformed and is unlikely to improve in the next 12-18 months. 


Furthermore, the agency forecasts that Tata Steel is more likely to be impacted by its curtailed European operations for at least one quarter, following which it will recover if the economic situation stabilises. The company has cut production due to COVID-19-related lockdown. 

Overall, production volume will be lower by 15-20pc in the current fiscal. If the sharp drop in volume and price pressure continues, the company is likely to report lower EBITDA in the fiscal year 2021 (April 2020-March 2021). Currently, a 7-10pc reduction in EBITDA has been estimated due to a slowdown in the global economy by the agency. 

The outlook could be revised based on economic conditions and change in the company’s credit profile.


Moody’s has placed Tata Steel’s Ba2 ratings corporate family rating (CFR) under review for a downgrade, according to Moody’s report. It has downgraded Tata Steels’ subsidiary Tata Steel UK’s (TSUKH) corporate family rating (CFR) to B3 from B2.

The rating revision comes in the wake of economic fallout as well as the declining oil and asset prices creating credit constraints across many sectors and markets. The steel sector has been significantly impacted resulting uncertainties and volatility in material cots, leaving TSUKH vulnerable to negative market sentiment.


Even before the COVID-19 outbreak, sluggish demand and weak economic growth had weakened credit profile of the company and its subsidiaries. Tata Steel’s EBITDA from Indian operations declined by almost 30pc during the nine months ending Dec 2019 to Rs 11,290/mt from Rs 16,366/mt in the prior-year period. EBITDA from European operations declined after showing an upward trend for almost four years, Moody’s said.


The agency forecasts the company could face challenges in the near term due to COVID-19 led economic downturn and declining sales and earnings, due to weak auto and manufacturing demand.


Moody’s downgrade review would focus on the impact of movement restrictions on Tata Steel’s operations; its prices and product spreads; government measures to support the steelmakers in their main markets and management’s strategy for coping with prolonged low and volatile commodity prices.

Leave a Reply

Your email address will not be published.