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Bullish or Bearish: How Do Steel Industry Indicators Look?

Mark O'Hara

A Deeper Dive into May 2016 Steel Industry Indicators

Steel industry indicators

Steel stocks are having a rough ride in May. They managed to weather the 1Q16 earnings season without any significant downward price action. The quarter eventually turned out to be a non-event for most steel companies. Although several steel companies missed their consensus earnings estimates, the Markets were bothered little, as the fundamentals were looking better. Add a touch of positive sentiment, and the Markets even ignored the lackluster earnings.

Roller-coaster year

It’s been a roller-coaster year for steel companies, as you can see in the above graph. Bulls and bears (SDOW) (SPXS) have been involved in a battle of sorts to take the honors. The year started on a weak note with most steel companies falling to multiyear lows in January. However, the bulls took charge, and we saw a decent upward price action between February and April as concerns over China’s slowdown eased.

Now May is turning out to be a rough month for steel companies such as United States Steel (X), Nucor (NUE), and AK Steel (AKS). Concerns over the health of the world’s second largest economy have resurfaced.

Series overview

The recent correction has put the spotlight back on steel stocks. The Market seems to realize that the commodity cycle has not yet fully turned around. In this series, we’ll look at some of the recent steel industry indicators. We’ll see how the demand-supply situation is playing out in the United States as well as globally. We’ll also look at the trend in steel prices and explore how steel prices could shape up in the coming months. This will help you understand whether the recent pullback is an opportunity or if more pain lies ahead for steel investors.

Let’s start by seeing if Chinese steel demand indicators are really that bad.

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