South, SE Asia auto chemical sectors most vulnerable to high costs – Moody’s – ICIS
SINGAPORE (ICIS)–High commodity prices will
strain the credit quality of rated companies in
south and southeast Asia in varying degrees,
with automotive-related and chemical companies
the most exposed, Moody’s Investors Service
said on Monday.
Elevated prices of key inputs such as steel,
aluminum and energy will hurt the profitability
of automotive manufacturers in the region,
particularly auto-parts suppliers, although
India’s strong car demand will support
carmakers’ pricing power, it said in a
Meanwhile, chemical companies face higher
feedstock costs and working capital
“High commodity prices remain a key risk that
adds to global macroeconomic uncertainty,
clouding the prospects for commodity-reliant
sectors,” Moody’s vice president and senior
analyst Maisam Hasnain said.
“Although commodity prices have declined in
recent weeks, they continue to be above
long-term averages,” Hasnain said.
Property developers, steelmakers and palm oil
producers have moderate exposure to the impact
of high commodity prices.
For steelmakers, strong steel demand will
support their earnings despite narrowing
product spreads on higher input costs.
Meanwhile, palm oil companies will need to
increase short-term borrowings to fund higher
working capital needs.
On the other hand, upstream oil and gas
producers benefit directly from high product
Refiners, too, will lift with bumper margins,
although they face higher input costs,
increased working capital needs and uncertainty
over their ability to pass on higher costs to
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