U.S. and European Steel Cannot Confirm Recovery: United States Steel Corporation (X), Steel Dynamics, Inc. (STLD)

However, the future of steel industry is still marred by uncertainty. The US steel industry is suffering from overcapacity and softening economic indicators as we go deeper into Q1 only further support this idea.  Iron ore prices in China have recovered nicely off of their September lows but capacity utilization in the U.S. is running around 75% down from 79% a year ago according to Platt’s.   Production so far from weekly estimates is also off 7% so far.  The American Iron and Steel Institute estimates that the U.S steel consumption rose by 7.8% in 2012 but imports of finished steel during the same period surged by 18% which indicates a rising share of foreign players, particularly China, in the American steel market.

With the Fed trying to induce inflation and the equity markets beginning to look heavy as they approach significant resistance levels around the world, commodity prices are beginning to soften as well.  U.S. copper and natural gas prices are falling back from important levels as have oil prices.  Steel producers in the U.S. and Europe will show cyclical strength and weakness until a real recovery takes hold in those economies.  I would avoid them as anything other than trading vehicles based on a 6 month lag in oil prices.

The article U.S. and European Steel Cannot Confirm Recovery originally appeared on Fool.com and is written by Peter Pham.

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