US steel industry
The steel industry has seen its fortunes change in 2016. However, after the spectacular rally, market sentiment seems to be turning negative towards leading US steel producers (XME). August wasn’t a happy month for US steelmakers. U.S. Steel (X) and AK Steel (AKS), which have been among the best-performing steel companies in 2016, lost 29.3% and 32%, respectively, in August. Nucor (NUE) and Steel Dynamics (STLD) lost 9.5% and 8.2%, respectively, in August.
The negative sentiment has continued into September as well. U.S. Steel has lost more than 16% so far in the month. ArcelorMittal (MT) has also shed 5.8% of its market capitalization amid the global sell-off in metal shares. The steel industry’s joyride might be coming to an end as the US rally fueled by trade cases is slowly fading away.
Investors in the commodity space should pay close attention to the underlying demand-supply equation. Steel isn’t an exception. Demand-supply dynamics are a key driver of steel prices. Demand-supply dynamics can give us crucial insights into the outlook for commodity prices. Furthermore, since commodities are driven by regional as well as global dynamics, it’s crucial for investors to look at the US as well as global indicators.
In this series, we’ll look at some of the key US and Chinese indicators. It’s important to note that China is the largest steel consumer and producer. The slowdown in the Chinese steel industry has been the biggest challenge for the global steel industry.
In the next part, we’ll look at some of the Chinese steel demand indicators.