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Moody's completes periodic review of ratings of China Baowu Steel Group

Steel News - Published on Mon, 15 Apr 2019

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Moody's Investors Service has completed a periodic review of the ratings of China Baowu Steel Group Corporation Limited and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.

Key rating considerations are summarized below.

China Baowu Steel Group Corporation Limited's (Baowu) A3 rating incorporates
(1) the company's baa3 Baseline Credit Assessment (BCA)
(2) Moody's assessment of a "High" likelihood of support from and a "High" level of dependence on the Government of China (A1 stable) in times of need, factors which result in a three-notch uplift.

Moody's support assessment considers Baowu's 100% ownership by the central government, the government's strong financial capability to render support, the company's strategic importance to China's major industries, its leading role in consolidating the steel industry, the high level of government supervision, and the certain social responsibilities it holds.

Baowu's BCA of baa3 primarily reflects its
(1) Leading market position as China's biggest steel-maker
(2) Integrated steel production, with a focus on high-value-added steel products (3) Good financial flexibility

However, Baowu's BCA is constrained by
(1) Its high geographic concentration in China
(2) The cyclical nature of the steel industry
(3) Potential macro challenges arising from the US-China trade tension and slower economic growth in China

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Posted By : Rabi Wangkhem on Mon, 15 Apr 2019
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