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Weak Global Macros Drag Down US Steel Companies

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Weak Global Macros Drag Down US Steel Companies PART 1 OF 12

Weak Global Macros Drag Down US Steel Companies

US steel companies

July has been a roller-coaster month for steel companies. Earlier in the month, several steel companies touched their 52-week lows. The stalemate between Greece and its creditors dampened investor sentiments, dragging down commodities like copper, iron ore, and steel. China’s stock market crash also played its part in intensifying the global sell-off.

The rout was not limited to steel stocks alone, and their counterparts in aluminum and copper also traded weakly. Commodities tend to be over-sensitive to any news flow from China.

Weak Global Macros Drag Down US Steel Companies

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Global macros

Positive news flow from Europe on the possibility of a fresh deal between Greece and its creditors was received well on Wall Street. The above graph shows the recent stock market performance for steel companies.

ArcelorMittal (MT), US Steel (X), and AK Steel (AKS) recovered from their 52-week lows, only to test those levels again on June 15. The SPDR S&P Metals and Mining ETF (XME), which is ~35% invested in steel companies, has also recovered from its lows.

Metal shares continue to trade weakly as global macros still remain challenging.

Series overview

It’s been a tough year so far for steel companies. There are certain positive data points related to steel demand, but weak global macros, especially China’s slowdown, could dampen the prospects for the US (SPY) steel industry.

In this series, we’ll explore the key indicators of the steel industry. These should help you better understand where the sector could be headed in the coming months. We’ll start by looking at the recent trend in US steel production.

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