It’s all about supply and demand. Too much steel and too few people making use of it may threaten to send steel exchange traded fund (ETF) prices lower in the coming months.

Both microeconomic and macroeconomic factors are expected to take their toll on the steel industry, which may have a negative effect on steel prices. Kevin Grewal for ETF Daily News reports that steel production on a global scale is up about 18% since 2009, which has left the world with more than it knows what to do with.

On the demand side, global steel consumption decreased 3.4% in June 2010 from a month earlier.  Investment in steel-intensive infrastructure and commercial and residential construction in China has also slowed, which was a critical force in the global demand. China also canceled export-tax rebates on some steel products to avoid the need for imports and help stabilize prices. [Steel ETFs Facing Headwinds.]

As the Federal government has revised its GDP outlook to a downward trend, the price of steel will have more downward pressure put upon it. One possible source of support for steel could be President Obama’s plan to spend $50 billion on infrastructure. But will that be enough? [6 ETFs to Play Obama’s Jobs Plan.]

For more stories about steel, visit our steel category.

  • Market Vectors Steel ETF (NYSEArca: SLX): SLX is 100% allocated to the United States; it’s up 5.2% in the last three months.
  • PowerShares Global Steel (NYSEArca: PSTL): Japan, the United States and Brazil are the top countries in this ETF; it’s up 6.1% in the last three months.

Tisha Guerrero 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.