What Are The Key Global Indicators For Steel Play Investors?



Investing in steel plays

In our recent series, we analyzed the US economic indicators that investors should track. However, steel is a global commodity. Steel companies in the US are affected by developments in major steel-consuming regions. China, India, Japan, and Europe are among the top steel-consuming countries. In these regions, the steel market conditions impact the US steel industry as well.

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What do we cover?

In this series, we’ll analyze the major global indicators. We’ll discuss the steel demand and supply dynamics. Steel supply can be gauged by steel production figures. The figures are released by the World Steel Association on a monthly basis.

However, steel consumption is tricky to estimate. Steel consumption data is released with a one-year lag. As a result, it’s quite stale for making any investment decisions. There are several indicators that investors can track to get a sense of steel consumption. We’ll cover these indicators in this series.

Steel industry’s performance

The steel industry had a roller coaster ride in 2014. This can be seen in the above chart. However, most steel plays delivered negative returns for investors. As you can see, only Steel Dynamics (STLD) managed to deliver positive stock market returns in 2014.

ArcelorMittal (MT) was the worst performer on Wall Street. It lost almost 40% of its market capitalization in 2014. AK Steel (AKS) wasn’t far behind. Last year, it lost more than a quarter of its market capitalization. US Steel Corporation (X) lost ~12% in 2014. Currently, it forms 2.86% of the SDPR S&P Metals and Mining ETF (XME).

In the next part of this series, we’ll analyze the latest steel production figures.


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