In the context of low world growth (2,6% GDP forecast for 2015 vs 2,7% for 2014), the last barometer sector risks of The Coface, edited in october, analyses five major sectors – energy, automotive, metals, paper-wood and information and communication technologies (ICT) – in the three zones surveyed – North America, emerging Asia and Western Europe.
The energy sector downgraded in the three zones
After the new fall in oil prices (-59% between June 2014 and 24 september 2015 for a barrel of Brent), Coface has decided to downgrade the energy sector in the three zones surveyed, which now represents a high level of risk in North America, emerging Asia and Western Europe.
In fact, to preserve their cash flow, the major oil companies are reconsidering their investments and are thus weakening the oil service companies.
In North America, companies have made drastic cuts in their investments, exploration / production companies have a high level of debt and prices are subject to downward pressure. In the same time Western Europe is suffering from cost and investment reduction plans.
On the contrary, although affected by the slowdown in China, the impact has been felt less in emerging Asia because of the public nature of the leading oil companies which reduce the risks.
The automotive sector : downgraded in emerging Asia but in the right direction in North America and Western Europe
While the automotive sector is heading in the right direction in North America, thanks in particular to an acceleration in luxury vehicle sales, the situation is really more difficult in emerging Asia, where Coface has decided to downgrade the automotive sector to medium risk. The slowdown in the Chinese economy where sales growth fell to 2,6% for the first eight months of 2015, as the increased competition, had an impact on the activity of manufacturers.
In Western Europe, we can observe an improvement due to many restructuring programmes designed to reduce costs and better discipline on prices. But the Volkswagen scandal can change everything, especially in Germany and Central European countries where the group is well implanted.
The metals sector : a risk which remains high in the three zones
In a context of relatively weak demand, the prices of the main metals have fallen since early 2014. In emerging Asia, where the risk is still very high, the sector is suffering from overcapacities which create a distortion between supply and demand. In North America, the sector is suffering from the slowdown in oil investments. But in Western Europe, which should become the most dynamic consumer of steel of the developed countries in 2015, the sector is benefiting from the dynamism in automotive sales.
The paper-wood sector : a risk still medium and high
Although the main causes of the fall in paper-wood industry are the questions of overcapacities and competition from electronic media, Coface sees, in this sector, a breath of optimism. In emerging Asia, the sector is boosted by the transformation in exports. In North America, while we can observe a gradual fall in the consumption of paper, the sector may benefit from the dynamic overall growth of the country in 2015. In Western Europe, the overall consumption of forest products remains low.
In Information and communication technologies (ICT), the risk has fallen and became medium
The level for the information and communication technologies sector is now the same for all the geographic zones since the risk level was upgraded to medium in Western Europe. Lower costs, new video platforms, storage services for individuals have contributed to maintain demand and high level of private consumption in this geographic zone. In the two other geographic zones, things are differents : in emerging Asia, the companies face to the saturation of the markets but could built other relays, such as the development of 4G, while in North America, players in the sector are faced with the strong competitive pressure in telecommunications from internet services companies like Facebook or Google.
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