Steel's Worst Performer Probing a Bottom?

By Brad Zigler

We got a little hint of reinflation in our real-world gauge (see "Computing Inflation In Real Time" at) yesterday, but it'll take a lot more braking of the deflationary trend before a bottom in asset values can be called. Annualized monetary inflation ticked up seven-tenths of a percent to 8.4% by Thursday's close.

 

U.S. Monetary Inflation Vs. Gold

One particularly buoyant asset in Thursday's market was Russian mining and metal company Mechel OAO (MTL), which topped the list of percentage gainers. The American Depositary Shares rose $3.40, or nearly 60%, to close at $9.08 on bargain hunting.

Mechel's ADS, like most steel producers, has been battered in recent weeks, dropping 73% below its 200-day moving average, one of the worst performance records of AMEX Steel Index constituents. Of the 27 issues comprising the index, only AK Steel Holding Corp. (AKS) has fared worse, and then just by basis points. As of yesterday's close, Mechel's year-to-date loss was 13% worse than that of the Market Vectors Steel ETF (SLX), the exchange-traded portfolio that tracks the AMEX Steel Index.

Mechel OAO (MTL) Vs. Market Vectors Steel ETF (SLX)

Mechel's shares were boosted by news that a deal had been inked with Chinese state-backed Minmetals, which calls for joint efforts in key projects such as the construction of a rail and structural steel mill at Chelyabinsk and the building of a new coal mining complex.

After a weak Friday opening, Mechel shares rebounded from profit-taking mode to speculative buying, and at last look was extending Thursday's gain by as much as 82 cents, or 9%.

Steel yourself for a wild ride to come.