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While in general insolvencies are not expected to rise sharply, an increase in business failures in Puerto Rico and the Houston area cannot be ruled out.

Both the rebound of steel and metals prices and increased domestic demand have helped to improve margins in 2017, which nevertheless remain tight.

Export orientation and diversification are key factors for business success in a business environment characterised by overcapacity and volatile prices.

Due to a high non-performing assets level banks remain reluctant to provide loans, and external financing at competitive conditions remains a challenge.

While the profit margin development is generally stable competition remains high with Asian steel and metals businesses on international markets.

While the outlook for late 2017 and 2018 remains positive, due to overcapacity there is on-going price pressure in most segments, affecting margins.

Production has increased again in 2017, but competitiveness of the domestic steel and metals industry remains negatively impacted by high power costs.

Payment experience has been good over the past two years, and steel and metals insolvencies decreased in 2016, with a stable outlook for 2017 and 2018.

Banks have generally tightened their lending policies for steel businesses due to the fierce competitive environment and still subdued domestic demand.

Revenues of the engineering services industry have rebounded since 2015 as greater liquidity in financial markets helped to boost construction spending.

While UK business insolvencies are forecast to increase in 2017 and 2018, the machinery sector is not expected to follow this deteriorating trend.

Lower demand from key buyer industries and high overcapacity has led to decreasing net profit margins for some businesses over the last two years.

Profit margins have increased over the last 12 months due to the benign business environment, however, a slight decline cannot be ruled out in the future.

Profit margins of machinery businesses rebounded in 2016 and are expected to improve further, but competition remains strong in the domestic market.

As competition is fierce in the domestic market price wars cannot be ruled out, particularly among businesses operating in the lower quality segment.

Key success factors for Danish machinery businesses remains their ability to streamline costs and investment in product development/new technology.

The general outlook remains positive, and margins are relatively high, especially in niche segments. However,competition from China is increasing.

Payment behaviour has been good over the last two years and the number of payment delays, defaults and insolvencies is expected to remain low in 2017.

Due to deteriorated results and margins, as well as increased payment delays and insolvencies our underwriting stance remains restrictive for the sector.

After a minor decrease from 45.0% in 2015 to 44.3% in 2016, the percentage of overdue B2B invoices in Asia Pacific increased again this year to 45.4%.