Investing in steelmakers: A guide to August 2014 steel production
Investing in steelmakers: A guide to August 2014 steel production (Part 1 of 10)
Steel production data
The World Steel Association, the global association of steel manufacturers, reported its August steel production data on September 22, 2014. This is an important indicator for investors in steel companies. In this series, we’ll analyze the various takeaways from this data and their effect on steel companies.
Why should investors monitor global statistics?
Steel is a global commodity. The prices of steel vary across various regions, but the trends in major steel consuming countries impact the overall market dynamics. The chart above shows the major steel consuming countries. China is the biggest consumer, accounting for almost half of global consumption. The second biggest steel-consuming region is the European Union (or EU). The U.S. is the third biggest consumer, followed by India in the fourth position.
What drives the steel industry?
Steel acts as a raw material for various industries, like construction and automotive, which together account for two-thirds of total steel consumption. These end consumers drive the demand for steel. Both the construction and automobile industries depend on economic growth. This makes steel demand also depend on economic activity.
Steel companies in the U.S.
ArcelorMittal (MT), United States Steel Corporation (X), Nucor Corporation (NUE), AK Steel (AKS), and Steel Dynamics (STLD) are a few of the major steel companies in the U.S. These companies directly benefit from any positive movement in the steel industry.
Along with these steel companies, ETFs like the SPDR S&P Metals and Mining ETF (XME) are another way to gain exposure to the steel industry. ETFs are a cost-effective way to gain the desired exposure, with the added advantage of diversification.
Let’s now look at the data released by the World Steel Association in the next part of this series.
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