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Is the Steel Industry Gaining Strength?

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Nov. 20 2020, Updated 1:16 p.m. ET

Steel industry

In our previous monthly steel market update, we discussed why May was an inflection point for steel markets. In the last couple of months, steel prices crashed sharply and were near their 2008 lows. Steel scrap prices also took a sharp downturn in February. As far as iron ore is concerned, its fundamentals have been weak for more than a year now.

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Has something changed?

There’s a broad consensus among companies’ executives—like Nucor (NUE), Steel Dynamics (STLD), and AK Steel (AKS)—that the second half of the year should be better than the first half. Currently, AK Steel forms 4.5% of the SPDR S&P Metals and Mining ETF (XME) and 0.14% of the iShares Core S&P Small-Cap ETF (IJR).

In this series, we’ll analyze some of the recent data points that steel investors should track closely. We’ll look at how steel demand and production is shaping up in the US. One of the steel industry’s biggest challenges is the global demand slowdown—led largely by China. You can read more about the Chinese steel industry in our recent series Why the Steel Industry Is in Double Trouble.

Wall Street performance

This year, steel companies have had a mixed performance on Wall Street. However, there are signs of a revival in the industry. Steel prices offer a reflection into the steel market’s dynamics. In the next part of this series, we’ll analyze how steel prices played out in May.

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