Steel Could Be the Next Victim

Furthermore, if global rate hikes are afoot, growth of emerging-market economies would slow, pushing the price of steel down as oversupply in these economies materializes.

On a related note, some believe foreign steel manufacturers may now be overvalued. China Precision Steel (CPSL Quote) was one of the day's biggest losers on Tuesday, shedding 5.47% to $6.40; the stock traded as high as $16.58 last year. (In recent trading Wednesday, the stock was rebounding, up 2.7% to $6.57.)

The bullish case for steel rests on the argument that demand shows no sign of slowing in the Middle East, while mines in China often have insufficient technology and skilled workers to produce the metal for construction.

"Globally, steel is strong in most major geographic regions, including China where the strength in the market has seen 'surplus' capacity refuse to withdraw," says an internal memo issued to traders at broker J.M. Finn in London. The memo notes that demand from the Middle East is strong, in particular Dubai, where 25% of the world's cranes are currently situated.

"This all paints a strong consumer and capital expenditure demand picture," the memo continues. "Ultimately, this strength will rekindle inflation fears if widespread capacity shortages emerge, as is starting to occur."

Again, such a scenario would likely spur rate hikes by global central bankers, curtailing economic growth and hurting demand for steel.