Global credit rating agency Standard & Poor's said Monday that South Korea's top steelmaker POSCO's credit rating will continue to face downward pressure due to worsening conditions in the global steel industry.

S&P said in a report that worsening industrial conditions will weigh on credit quality of North Asia's three largest steelmakers, including China's Baosteel Group, Japan's Nippon Steel and South Korea's POSCO, warning that steel industry fundamentals are likely to deteriorate in 2012. "Unfavorable conditions make it unlikely that the credit quality of these companies will pick up in the next 12 months," said Han Sangyun, a credit analyst at S&P in Hong Kong.

Overcoming the unfavorable conditions will require significant investment on upstream integration and expansion of steel capacity, resulting in a more pressure on their credit quality, the analyst said.

Global steel industry faced challenges due to weak demand for steel products stemming from economic slowdown in Europe and China. A recent increase in the volatility of steel prices illustrated growing imbalances between supply and demand in Asia.

POSCO's operating profit plunged 41 percent in the first quarter from a year earlier and was down 21 percent from three months before. S&P kept its 'A-minus' long-term corporate credit and debt ratings on POSCO, while maintaining its outlook as ' negative.'

The analyst said that continued weak demand for steel, especially in China, and plans to expand capacity in the region will likely worsen oversupply for at least the next 12 months.

Han, however, noted that the three steelmakers were better positioned to ride out the downswing than their peers because of their strong market positions, saying that over the medium and long term, secular growth in demand for steel along with China's plan to rationalize capacity will support stronger dynamics between supply and demand.

Source-Xinhua