As Chinese Steel Futures Rise, Consider the 'SLX' ETF

China’s demand for steel continues to rise, with steel futures hitting 10-year highs. The VanEck Vectors Steel ETF (SLX) is up 32% year-to-date.

“Iron ore price surged to 10-year high this week after Vale, Rio Tinto and BHP released disappointing output figures,” a article said.

SLX tries to reflect the performance of the NYSE Arca Steel Index, which follows global companies involved in the steel industry. While more than a third of SLX’s lineup is allocated to U.S. steel producers, the ETF has a heavy global tilt, including exposure to ex-U.S. developed markets and emerging markets steel companies.

SLX investors get:

  1. One-Trade Access to the Steel Industry: An industry supporting global industrialization.
  2. A Pure Play with Global Scope: Includes companies involved in a variety of activities related to steel production.
  3. Convenient Customization: Customize overall commodity exposure with targeted allocation to steel companies.
  4. Strong Performance: The fund is up over 160% within the past 12 months.

SLX Chart

A Classic Bull Market for Steel

Iron ore futures in Asia ended last week’s trading session on a high note to mark five straight weeks of gains. Strong global demand paired with China’s anti-pollution efforts to curb output have done wonders for steel prices.

“Steel prices on the Shanghai Futures Exchange extended gains, with construction steel rebar rising 1.7% to 5,299 yuan a tonne, just below a record-high 5,300 yuan,” a Hellenic Shipping News Worldwide article noted. “Hot-rolled coil, used in car bodies and home appliances, climbed 0.9% to 5,590 yuan a tonne, after touching a record-peak 5,597 yuan.”

“This is a classic bull-market cycle for steel,” analysts at J.P. Morgan said in a note. “As the world ex-China emerges from the pandemic and reacts to stimulus measures, demand is recovering at a fast pace.”

China is only helping to boost prices further with its attempts to stifle steel production to minimize pollution. China leads the world in exporting steel materials and steel-based products.

“Talks about further steel production curbs in China also helped steel prices skyrocket in Asia, with hot-rolled coil soaring to as high as $900 a tonne,” the article said further. “Following curbs in the top steelmaking city of Tangshan, Handan city in China’s steel hub Hebei province will implement production control measures in its steel and coking sectors from April 21 to June 30, the state-backed China Metallurgical News reported.”

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