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Where to Look for Value in Steel ETFs

The VanEck Vectors Steel ETF (SLX) is up about 15% year-to-date and resides just 3% below its recent highs, but some market observers are pondering the value proposition currently being offered by steel equities. SLX tries to reflect the performance of the NYSE Arca Steel Index, which follows global companies involved in the steel industry. Part of the problem are expectations that the Trump Administration will push off its ambitious infrastructure effort until next year. “Steel stocks have officially come off their early-2017 highs. While the year started off well for the US steel industry, we started to see weakness thereafter, though the Trump administration’s decision to order an investigation under Section 232 of the Trade Expansion Act of 1962 to see whether steel imports threaten US national security did provide some relief to steelmakers,” according to Market Realist. Donald Trump in the White House is widely seen as a catalyst for the steel industry. During the campaign, Trump proposed significant infrastructure spending as an avenue for boosting the U.S. economy. If those plans see the light of day, SLX and steel stocks could benefit. However, it is widely believed the Trump infrastructure plan will be pushed back to 2018, news that has disappointed investors to start 2017. Related: Steel ETF Continues Its Comeback Despite the initial euphoria, the investigation seems to have gone into cold storage. Meanwhile, US steelmakers are keeping the issue of rising imports alive, regularly slamming 'unfairly' and 'illegally' traded steel products during their earnings calls. Most recently, US steelmakers wrote a letter to President Trump, highlighting higher steel imports and requesting urgent action,” reports Market Realist. Year-to-date, investors have pulled $42.5 million from SLX. “Strong steel demand growth in developing countries will offset stabilizing demand in developed economies, but it means mostly flat overall global demand for likely the next two decades or more,” according to the World Steel Association . “Combine those factors with declining trends in steel use — due in part to increased production of high-strength, lightweight steels and a sharper focus on reuse and recycling — and the outcome is clear.” For more information on the steel industry, visit our steel category. Read more on ETFtrends.com