Steel exchange traded funds (ETFs) have cooled off since their stellar 2010. The fundamentals of supply and demand, however, could once again save the day.

David Fessler for Investment U reports that iron ore prices are surging, and they could continue to do so for the foreseeable future.

  • There’s not nearly enough of iron ore to go around, yet demand from China and other emerging markets isn’t slowing any.
  • In a few months, Fessler expects that steel mills will be paying more for iron ore, which will in turn force them to raise steel prices.
  • The combination of rising prices and unabated demand for steel could result in wider profit margins for the companies that make up Market Vectors Steel ETF (NYSEArca: SLX) and PowerShares Global Steel (NYSEArca: PSTL).

The price of steel ultimately filters down into the costs of everyday goods and services, because it’s found in just about everything we use: cars, buildings, bridges, pipes, factories, machinery and equipment. [Steel ETFs Gear Up for Gains.]

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.