Equity markets closed deep in the red yesterday. Looking at the broader-market ETFs, we see that the SPDR S&P 500 ETF (SPY) lost 1.36%, shrinking its year-to-date (or YTD) losses to 2.4%. Some of the biggest losses were in the metals and mining space. U.S. Steel Corporation (X) and AK Steel (AKS) respectively lost 6.5% and 6.8%. Alcoa (AA) and Century Aluminum (CENX) lost 2.8% and 5.2%, respectively.
Interestingly, metal stocks have been in the line of fire as US–China trade tensions heat up. However, Section 232 tariffs against steel and aluminum imports, which were apparently meant to protect US manufacturers, haven’t really pushed investors to steel and aluminum companies. Most US steel and aluminum producers are trading with YTD losses despite the sharp rise in US steel prices and physical aluminum premiums.
Now we’re seeing an escalation in the trade war. Last month, after the second round of trade talks in Washington, China and the United States decided to push the pause button on the trade war. However, the optimism was rather short-lived, and President Trump threatened tariffs on some Chinese goods a few days after.
Now, after the summit with Kim Jong-un, we’ve seen Trump get even more aggressive on trade issues with China. In the next part of this series, we’ll analyze what the trade war means for metal investors.