Steel industry’s 2016 outlook
Last year was a turbulent year for global equity markets and was nothing short of a nightmare for the US steel industry. Steel stocks including United States Steel Corporation (X), ArcelorMittal (MT), and AK Steel Holding Corporation (AKS) fell to multiyear lows last year.
The graph above shows the steel companies’ 2015 price movements. United States Steel Corporation and ArcelorMittal lost more than 60% of their respective market capitalizations in 2015. Nucor Corporation (NUE) also ended the year with losses of ~18%. Currently, Nucor forms 2.8% of the Materials Select Sector SPDR Fund (XLB). Metal producers currently make up ~9% of XLB’s portfolio.
Steel industry in 2015
The journey was never going to be smooth for steel companies in 2015. Last January, we discussed the steel industry’s 2015 outlook in our series Why the US Steel Industry Has More Questions Than Answers in 2015. Back then, we noted that steel demand from the construction and automotive sectors had the potential to be strong in 2015. We also noted that the energy sector’s steel demand might be subdued following the crash in crude oil prices.
The demand story more or less played out according to the broader market expectations. However, steel prices fell much more than what analysts were expecting.
Now, with 2015 behind us, investors are wondering whether 2016 could be any better for steel companies or whether things could get even worse. In this series, we’ll look at the US steel industry’s 2016 outlook and explore how steel demand could play out in 2016. We’ll also be looking at what direction steel prices might take this year.