International credit rating agency Moody's has announced that it has downgraded Russian steelmaker Mechel's rating to B3 from B2, changing its outlook to negative from stable.
Moody's stated that the downgrade reflects low coking coal prices and the challenges this presents for Mechel given its limited liquidity and high level of refinancing risk. The rating agency reports a fairly low probability of substantial recovery over the next 12-18 months for Mechel, adding that it will take some time for the company to implement its strategy regarding the disposal of non-core assets given the challenging market conditions.
The negative outlook on the rating reflects Moody's view that Mechel's financial metrics could deteriorate over the next 12-18 months unless coking coal prices improve and/or the company's efforts to dispose of its non-core assets or attract a strategic investor yield tangible results.
Moody's also indicated that it sees little basis for commodity prices to significantly improve in 2013 given relatively soft global demand for steel.