Steel stocks feel pressure from China
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Hot-rolled steel prices in the United States have risen about 50% year-to-date. The rise in prices fueled the rally in the sector’s share prices.
Morris Mac Matzen / AFP via Getty Images
US steelmakers sense how unhappy China is with high iron ore prices.
Their stocks generally fell on Friday, pushed down by iron ore prices that the Chinese government is trying to contain.
Steel in the United States
(symbol: X),
Steel dynamics
(STLD), and
Cleveland-Cliffs
(CLF) were down 1.8%, 0.2% and 3.5%, respectively at midday.
Nucor (NUE)
achieved a 1.1% gain. Steel distributor Reliance Steel & Aluminum (RS) was down 1.3%.
The rest of the market is doing well. the
S&P 500
and
Dow Jones Industrial Average
were up 1.4% and 1% respectively.
Iron ore futures prices triggered the decline in inventories on Friday, falling nearly 10% on reports that the Chinese government has asked steel mills to help control the surge in prices. China is the world’s largest steel producer, with around 55% of all steel production capacity.
Iron ore is an essential raw material in the manufacture of steel. Rising ore prices push up steel prices. Rising steel prices are hurting Chinese manufacturers’ ability to make money.
Iron ore prices are around $ 200 per metric tonne and about 1.5 tonnes of ore produces a tonne of steel. Prices have risen nearly 30% since the start of the year on Friday.
Hot-rolled steel prices, a key benchmark, have not moved on Chinese ore futures. A tonne of hot-rolled steel currently costs about $ 1,500. If the drop in ore prices continues, the price of finished steel will eventually drop around the world.
Hot-rolled steel prices in the United States have risen about 50% year-to-date. The rise in prices fueled the rally in the sector’s share prices.
Shares of US Steel, Nucor, Steel Dynamics and Cliffs are up 61% year-to-date on average. This quartet is up more than 240% on average over the last 12 months.
Write to Al Root at [email protected]