Investors will have to keep a close watch over China, the largest producer of steel, which made up half of the 1.6 billion metric tons produced last year. Beijing has cut back production after the international community accused Chinese producers of dumping excess products on the global market.

“Steel production in China (50% of global production) tends to dominate iron ore and metallurgical coal prices, and these inform scrap prices, which in turn inform U.S. steel prices. Falling iron ore and Chinese steel prices, coupled with fairly low U.S. service center inventories, augur declining steel prices in the U.S. Fitch expects China’s exports to return to 100 million tonnes per year and the steel sector to remain oversupplied in the medium term given that capacity cuts to producing mills will be difficult to achieve. This is expected to put downward pressure on global steel prices,” said Fitch.

SLX, which debuted in the fourth quarter of 2006, holds 27 stocks and has $144.2 million in assets under management. Eight countries are represented in the ETF.

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