Key steel industry indicators
The steel industry was having a decent run this year until the recent carnage caused by collapsing crude oil prices. Share prices of most steel plays have fallen over the past few days. United States Steel Corporation (X) has seen its market capitalization fall by around a quarter in the past month. ArcelorMittal SA (MT) also hit its 52-week low recently. Most of the fall happened after the Organization of Petroleum Exporting Countries, or OPEC, meeting on November 27, at which OPEC decided to hold its crude oil output levels steady.
The above chart illustrates how crude oil prices have fallen by more than 20% since November 27. The prices of most commodities such as steel and aluminum have also fallen.
Which indicators should investors follow?
In this series, we’ll discuss the key steel industry indicators that investors in steel plays should watch. We’ll also analyze the outlook for end consumers of steel and look at steel imports in the US. The US steel industry considers cheap imports from countries like China a major threat.
Another key indicator that investors in steel players should watch is the movement of raw material prices. Iron ore, steel scrap, and coal are the major raw material for steel companies.
Steel companies such as Nucor Corporation (NUE) and Steel Dynamics, Inc. (STLD) use steel scrap to produce steel. This is because these companies mainly use electric arc furnaces, or EAF, for steel production. Currently, both STLD and NUE are among the top ten holdings of the SPDR S&P Metals and Mining ETF (XME).
Let’s now look at the recent movement in steel prices.