Jiangsu Shagang Group Company Limited (Surveillance Report)

Lianhe Global has affirmed ‘BBB+’ global scale Long-term Issuer and Issuance Credit Rating of Jiangsu Shagang Group Company Limited (“Shagang” or “the company”); Issuer Rating Outlook Revised to Stable.

The Issuer Rating reflects Shagang’s competitive market position as the largest private steel producer in China, operating efficiency and above industry-average utilization rate, and operating cash flow generation capability. The company’s rating, however, is constrained by its low self-sufficiency in raw materials, which makes it vulnerable to commodity price fluctuations, operational concentration and relatively lack of diversification into high-valueadded products.

The Stable Outlook reflects our expectation that Shagang will sustain a stable and sizable scale of operations, positive operating cash flow and its healthy liquidity position. In addition, we expect the company to exhibit a prudent manner in containing its financial leverage. Although Shagang’s revenue and profitability are under pressure mainly given the weakening industry demand, we expect them to stabilize gradually in the next 12-24 months.