Why steel is an essential commodity—the backbone of an economy


Oct. 29 2019, Updated 10:00 p.m. ET

 An essential commodity

Steel is vital for any economy. In a lot of ways, steel consumption in an economy reflects the economy’s health. It shouldn’t surprise you that steel consumption fell by as much as 50% in some countries during the recession of 2008.

We use steel in our daily lives—whether in the car we drive, the bridges we drive on, or the homes we live in. You can describe steel’s importance in a simple quote from the World Steel Association, “steel everywhere in our lives.” The sector also supports around a million jobs in the U.S., directly or indirectly.

While steel has a definite place in our lives, as we can see in the image above, in this series, we’ll analyze the relevance of steel companies in your portfolio.

Steel types and uses

As per the World Steel Organization, there are around 3,500 different types of steel. Each category has a different process, chemical combination, shape, and use. The major types are:

  • Flats: Consisting of sheets and plates and accounting for around 46% of global shipments, as per a report from the OECD
  • Longs: Consisting of bars, rebars, wire rods, structural, and rail and also accounting for 46% of global shipments.
  • Pipes and tubes: Consisting, as the name suggests, of pipes-shaped pieces and accounting for around an 8% share in world shipments

While there are a lot more categories of steel, we’ll limit our discussion to these types and move on to the more important factors that affect your investments.

Steel companies listed in the U.S.

Arcelor Mittal ADR (MT), United States Steel Corporation (X), Nucor Corporation (NUE), and Reliance Steel & Aluminum (RS) are a few major listed steel companies in the U.S. These companies benefit directly from any positive movement in the steel industry.

Along with listed steel companies, ETFs like the SPDR S&P Metals and Mining ETF (XME) are also an alternative way for you to gain exposure to the steel industry.

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