Steel Could Be the Next Victim

Steel prices are headed up slightly this week, according to the American Metal Market, with prices of cold-roll Class One steel -- a fair benchmark class for the commodity -- trading at 32.50 cents per hundred sheets.

Steel manufacturers in the U.S. have fared similarly well. Last Thursday, shares in Nucor (NUE Quote) jumped 5.3% to $63.12 after the company announced that first-quarter profit may rise to $1.25 a share because of strong global demand in 2006. On the same day, Worthington Industries (WOR Quote) rose 3.8%, U.S. Steel (X Quote) jumped 3.2%, Arcelor Mittal (MT Quote) gained 1.8%, and AKS Steel (AKS Quote) rose 1.2%, making steel producers the second-largest gainer for the day.

In addition, Ryerson (RYI Quote) has surged 18% since Feb. 27 after saying it will review "strategic alternatives," including a possible sale of the company. (Steelmakers were mixed in recent trading Wednesday: AK Steel and Mittal were each down 0.6%, and Worthington was off 0.2%. Nucor was up 1.9%, Ryerson higher by 2.7% and U.S. Steel up 0.3% at $87.26 after trading as low as $85.91 intraday.)

But the downward pressure of a slowly unwinding yen carry trade and rising bearish sentiment in Asian markets may mean that steel prices have seen their best days. Following Tuesday's rout on Wall Street, China's Shanghai Composite lost 2% on Wednesday, the Hang Seng fell 2.57%, and the Nikkei 225 plummeted 2.92% amid renewed concerns about the yen carry trade unwinding, overheating Asian economies and the potential effects of a weaker U.S. outlook.