This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Steel Defies Expectations With Summer Rally

Stocks in this article: PSTL SLX

By Michael Johnston of ETFdb

What was supposed to be a quiet summer in the steel industry has turned out to be rather eventful. With most analysts expecting prices to remain weak for the remainder of the year, steel has shown signs of rallying in recent weeks as global supplies have eased and another showdown with China appears to have been averted.

Last week, the Obama administration stepped up its pressure on China's currency policy, filing two complaints against the country with the World Trade Organization. One of those was related to anti-dumping duties imposed by China on U.S. Steel, as the administration argued that China failed to comply with WTO procedures in reaching its conclusions. But recent developments out of China also appear to be brightening the outlook for U.S. steelmakers, as the world's second-largest economy has slashed output to comply with energy savings targets imposed by Beijing.

"China has long been both a savior and a threat to the world's steel industry," Robert Guy Matthews writes. "Its economic stimulus program led to steel-intensive infrastructure building, with producers running at near-full capacity to meet the demand." Now as China pulls back on steel production, the decline in global supplies has set off a late summer rally in metals markets. Steel producers from China and a handful of other developed and emerging markets have announced material price hikes in recent weeks, defying expectations in an environment where underlying economic fundamentals remain weak.

Some suspect that the rally will be short-lived, running out of steam before the calendar turns to 2011. Though China has taken steps to curb steel production in the short term, it seems unlikely the country will impose any longer-term cuts in output. Moreover, expectations for muted economic growth in the U.S. and much of the developed world will no doubt weigh on demand for the foreseeable future.

STEEL ETFS IN FOCUS For investors looking to make a play on the global steel market, there are a couple of different options:

Market Vectors Steel Index ETF (SLX) This ETF is linked to the NYSE Arca Steel Index, a benchmark consisting of companies involved in a variety of activities related to steel production, including the operation of manufacturing mills, fabrication of steel products or the extraction and reduction of iron ore. A breakdown of SLX's holdings shows that about 65% of assets are international, with the remainder consisting of U.S. stocks. The international component includes minimal exposure to China, as Brazil, the U.K. and Luxembourg are afforded the largest weightings.

PowerShares Global Steel Portfolio (PSTL) This ETF is linked to the NASDAQ OMX Global Steel Index, a benchmark that measures the performance of the largest global companies involved in the manufacturing and storage of iron and steel products. Relative to SLX, PSTL maintains a heavier international tilt; only about 12% of assets are U.S. stocks. Japan gets the largest individual country weighting, accounting for about 20% of the fund's holdings.

>To submit a news tip, email: tips@thestreet.com.

RELATED STORIES:



Follow TheStreet.com on Twitter and become a fan on Facebook.

At the time of publication, Michael Johnston had no positions in the securities mentioned. ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned may place paid advertisements with ETF Database. All content on ETF Database is produced independently of any advertising relationships.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs