Steel Producer ETF Slows Down, Outlining Deflationary Pressures
April 19th at 4:57pm by Tom Lydon
As the global economic engine slows, weaker demand for steel has weighed on the exchange traded fund that track global steel producers.
The Market Vectors Steel ETF (NYSEArca: SLX) dropped 6.2% over the past week. The fund is down 18.6% over the past three months.
China Steel Corp, the country’s only integrated steel producer, cut its domestic steel prices for June by an average 2.08% after there consecutive periods of increases for January, February and March shipments, reports Camaron Kao for Taipei Times.
“We are unsure whether demand will improve much for the second half of this year…the company may start raising steel prices at the end of the third quarter at the earliest,” Tsai Yen-ling, an analyst at Grand Cathay Securities, said in a Fox Business article.
“Market conditions have changed rapidly in recent days, mostly due to oversupply in China,” China Steel vice president Liu Jih-gang said in the article. “When they [Chinese steel mills] cannot sell all of their products, they cut prices.”
Moreover, the market is being flooded with cheaper Japanese steel due to the yen’s recent depreciation.
The slower global economy has also lessened demand for steel products, with the International Monetary Fund lowering its projection of global economic growth to 3.3% from 3.5%.
Rio Tinto, the largest holding in SLX, representing 13.0% of the overall ETF, is also planning to spend $250 billion in new mines, which could further pressure prices that are expected to drop for at least the next three years, reports Jesse Riseborough for Mineweb.
Market Vectors Steel 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.