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.
“A steel ETF breakout here would be huge for steel bulls and keep the bullish trend channel intact. For that to happen, the bulls want to see a price breakout above the prior highs on a closing basis (and preferably on strong volume). Note that a breakout here would target $50 next (the 2013 & 2014 highs),” reports ETF Daily News.
“Strong steel demand growth in developing countries will offset stabilizing demand in developed economies, but it means mostly flat overall global demand for likely the next two decades or more,” according to the World Steel Association. “Combine those factors with declining trends in steel use — due in part to increased production of high-strength, lightweight steels and a sharper focus on reuse and recycling — and the outcome is clear.”
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