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Steel Companies Continue to Hurt as China’s Slump Worsens

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Steel companies continue to sag

Metal stocks have seen increased volatility over the last few trading sessions. Share prices of aluminum and copper companies are testing their 2009 lows. Steel stocks are also not far behind in this carnage. Share prices of most steel companies are approaching their 52-week lows.

The chart above shows the recent Wall Street performance of steel companies. Steel companies had a decent run in July. Earnings of most steel companies were better than analysts’ expectations. Steel companies including U.S. Steel (X), AK Steel (AKS), and Steel Dynamics (STLD) rose after their 2Q15 earnings.

However, over the last few trading sessions, steel companies have pared most of the gains.

Series overview

In this series, we’ll look at recent steel industry indicators. We’ll also explore how the Chinese steel industry has been doing lately. The slowdown in China has been a major challenge for the global steel industry. Share prices of all companies in the metals and mining space have been negatively hit by the worse-than-expected slowdown in China.

Steel imports are perhaps the biggest risk that US steel companies currently face. We’ll analyze the recent trend in US steel imports in the later parts of this series. In 2015, the US steel industry has filed a series of trade cases against steel imports from countries like India and Brazil.

The SPDR S&P Metals and Mining ETF (XME) is an alternative way to play the steel industry. It has ~42% of its holdings invested in steel companies. Allegheny Technologies (ATI) currently forms 3.22% of the XME.

In the next part, we’ll explore how the US steel demand indicators are playing out.

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