Steel ETFs Pull Back on China
March 21st 2012 at 1:00pm by Tom Lydon
Exchange traded funds tracking the steel industry buckled after BHP Billiton executive said China, the largest steelmaker, is starting to focus more on consumer spending and less on building projects.
Market Vectors Steel Index ETF Fund ETF (NYSEArca: SLX) lost over 2% Tuesday and the Powershares Global Steel Portfolio ETF (NYSEArca: PSTL) was about 1% lower. Nevertheless, SLX is up 18.2% year-to-date while PSTL has gained 16.5% year-to-date.
“The big infrastructure build clearly will come to some end,” said Ian Ashby, BHP’s president of iron ore, reports Elisabeth Behrmann for Bloomberg. “Steel growth rates will flatten, and they have flattened, and we still see positive growth out to the middle of the next decade.”
According to the China Iron and Steel Association, China’s steel output will slow to 4% this year. Gu Xianghua, deputy secretary general of the association, said that China’s vehicle sales may only expand at 5% in 2012, compared to the previous projection of 8%, due to the weakened economic conditions. [China ETFs fall on Growth Concerns]
Nevertheless, Ashby remains confident that China’s steel demand will remain positive and expand to between 1 billion metric tons to 1.1 billion tons by 2025 from its current 700 million tons output. Additionally, BHP will not be slowing its plans to add more capacity.
“We’re still confident in the long-term demand for commodities generally, of which iron ore is one, as one-third of the global population is urbanizing and the population is getting bigger,” Ashby said.
Market Vectors Steel Index ETF Fund ETF
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.