In our last series, we looked at key indicators that impact US-based steel companies like U.S. Steel (X) and Nucor (NUE). We saw that spot steel prices could be bottoming out. We looked at companies like AK Steel (AKS) that have raised prices on some of their steel products.
Nucor currently forms 2.6% of the Materials Select Sector SPDR ETF (XLB).
What will we cover in this series?
In this series, we’ll cover the latest trends and economic indicators in the Chinese steel industry. China (FXI) is the world’s largest producer and consumer of steel products. The slowdown in China’s steel demand and thus steel imports is a major threat to the global steel industry.
We’ll look at how China’s steel demand is shaping up. There are several economic indicators of Chinese steel demand that investors can track. The Chinese construction industry is the most important driver of global steel demand. In the coming parts of this series, we’ll analyze some key indicators of China’s real estate sector.
The steel industry
The steel industry has been out of favor with investors for quite some time now. The steel industry has seen its fortunes change ever since OPEC (Organization of Petroleum Exporting Countries) decided against reducing daily oil production. Crude oil prices have fallen steeply and so have steel and iron ore prices. Prices of most steel companies have corrected sharply since then, as you can see in the above chart.
China’s steel exports increased at a brisk pace last year. In the next part, we’ll look at the recent trend in Chinese steel exports.