(The following statement was released by the rating agency)
March 01 - Fitch Ratings has assigned Baosteel Group Corporation’s (Baosteel Group, ‘A-'/Stable) senior unsecured offshore CNY bonds final ratings of ‘A-’ as follows:
CNY500m 3.25% senior unsecured bond due 2014: ‘A-'
CNY900m 3.675% senior unsecured bond due 2015: ‘A-'
CNY1,500m 4.15% senior unsecured bond due 2017: ‘A-'
This follows the receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 19 February 2012.
The ratings are supported by Baosteel Group’s position as the largest state-owned steel company in China, its stable profitability underpinned by a high value-added product mix, and strong customer relationship. The ratings are also supported by its diversified earnings from non-steel production, a strong balance sheet and its moderately strong linkages with the state. The latter provides a single-notch uplift to Baosteel Group’s standalone ‘BBB+’ rating.
The ratings are constrained by the competitive and fragmented Chinese steel industry that continues to be affected by over-capacity. Furthermore, raw material concentration in few suppliers constrains steel producers’ profit margins.