SINGAPORE — The outlook for Asia’s steel industry remains stable on the expectation that demand will increase modestly and there will be no significant increases in steel capacity in China over the next 12 months, according to Moody’s Investors Service.

The imbalance between supply and demand for steel in China—which accounts for more than 70 percent of steel production and consumption in the region—has been the key reason for the industry’s weak fundamentals, Moody’s vice president and senior credit officer Chris Park said. "Moody’s expects this imbalance to stabilize in 2013 as consumption rises modestly and capacity addition slows."

China’s demand for steel, which bottomed out in the third quarter of 2012, should increase by 2 to 4 percent in 2013 after growing about 2 percent this year, Park said. Recently approved infrastructure projects and modest growth in exports will be the main drivers for demand, he added.

The profitability of Asian steelmakers will improve moderately over the next 12 months, although it will remain significantly below historical averages, according to a new Moody’s report.

Moody’s expects net steel exports from China to grow by more than 20 percent this year and to remain near that level in 2013, preventing profit margins at Asian steel producers from improving significantly.

A version of this article was first published by AMM sister publication Steel First.