If you’re an investor in any of the major steel companies, it’s likely that your investment hasn’t given the desired returns over the last year. The same holds true for all of the metal companies. The share prices of copper and aluminum companies have also been on falling this year.
It has been a challenging year for the US steel industry. The challenges are reflected in the steel companies’ stock prices. You can see this in the above graph. Most steel companies continue to languish near multiyear lows. U.S. Steel (X) and ArcelorMittal (MT) hit their fresh 52-week lows on November 12. AK Steel (AKS) and Commercial Metals (CMC) are getting close to their 52-week lows. Currently, AK Steel forms 4.8% of the SPDR S&P Metals & Mining ETF (XME).
Steel companies have faced a challenging operating environment for the last few quarters. While discussing the steel industry’s 2015 outlook, we highlighted that the year looked tough for US steel companies. The year turned out to be the most challenging year for the entire metals space since the global financial crisis in 2008–2009.
There was a belief in the market that the steel industry might be looking at a possible 2H15 recovery. To be fair, we also subscribed to this view. Steel companies’ fiscal 2Q15 earnings also raised optimism of a possible recovery. The fiscal 2Q15 earnings of most steel companies came in better than the market expectations. Most steel companies rose after declaring their fiscal 2Q15 financial results. However, the fiscal 3Q15 financial results of most steel companies failed to cheer investors.
So, what went wrong with the steel industry’s expected recovery? More importantly, can there still be a near-term recovery in steel stocks or will we see new 52-week lows? We’ll discuss these aspects throughout this series.