uploads///part

Could the US Steel Industry Fall Further in 2016?

By

Jan. 8 2016, Updated 9:32 a.m. ET

US steel industry in 2016

Last year was the most challenging year for the US steel industry since the global financial crisis of 2008–2009. Steel companies saw their market capitalizations dwindle to unprecedented levels in 2015. ArcelorMittal’s (MT) market capitalization fell to $7 billion in 2015. Compare that with the $33.1 billion that Mittal Steel paid to acquire Arcelor in 2006, and you’ll find that the combined entity today amounts to only about one-fifth of Arcelor’s 2006 price tag. With only about one-fifth of ArcelorMittal’s steel capacity, Nucor Corporation (NUE) commands a much higher market capitalization.

Article continues below advertisement

AK Steel Holding Corporation’s (AKS) market capitalization today is less than what it paid to acquire the plant in Dearborn, Michigan, from Severstal last year. United States Steel Corporation’s (X) market capitalization is slightly above the $1 billion mark. United States Steel Corporation was the first company ever to hit a market capitalization of $1 billion.

Key drivers

The big question now is whether steel stocks can finally recover from the slump. This year has started on a somber note, and most commodity (DBC) stocks fell steeply on the first trading day of the year as the Chinese manufacturing PMI (purchasing managers’ index) came in lower than expected. China’s manufacturing PMI has now been below the crucial 50 mark for ten consecutive months, as can be seen in the graph above.

Latest crash in the Chinese market

China’s lower-than-expected December manufacturing activity triggered a big sell-off in the Chinese equity markets, which had repercussions on other asset classes including commodities and global equities. China’s steady devaluation of its currency has not helped matters and has sent its equity markets as well as global stocks southward. Steel stocks have fallen in the current wave of the metal meltdown. However, the fall in steel stocks has not been as steep as the drop in copper and aluminum stocks.

Can steel companies hold their ground in what looks like a challenging year for the global markets? In the coming parts of this series, we’ll explore what factors will drive steel companies’ 2016 performance.

Advertisement

More From Market Realist

  • Businesswoman looking out a window
    Company & Industry Overviews
    Shifting Focus: Three Women Investing Funds in 2021
  • Aol logo on office building,
    Company & Industry Overviews
    What We Know About Apollo Global Management, New Owners of AOL and Yahoo
  • Chick-fil-A sign
    Company & Industry Overviews
    Why It Only Costs $10K to Own a Chick-fil-A Location
  • Beyond Meat Burger 3.0
    Company & Industry Overviews
    How Is Beyond Burger 3.0 Different and Will It Bring BYND Stock Up?
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.