Steel ETF Could Feel Weight of Increased ProductionTom Lydon • Jun. 3, 2010
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Tue, Oct. 21, 12:34 PM
- The U.S. says it will terminate a 15-year-old deal sheltering Russian flat-rolled steel producers from high import duties, and anti-dumping duties will apply beginning Dec. 16.
- U.S. steel producers, including U.S. Steel (X +5%) and Nucor (NUE +2.2%), complained to the Commerce Department in July that the reference price set in a 1999 agreement, which also set a cap on imports, had been below U.S. market prices since 2004.
- However, J.P. Morgan analysts see no reason for buying steel stocks (NYSEARCA:SLX), saying the move impacts only 1.4% of U.S. market share; in fact, the firm suggests shorting steel stocks on the "misinterpretation" of duties on Russian imports of hot rolled steel.
- Other steels also are higher: AKS +3.9%, MT +3.6%, CMC +2.3%, STLD +1.7%.
Thu, Sep. 18, 3:21 PM
- In the doldrums not long ago, steel stocks are now among the hottest in the market; in the last three months, X +81%, STLD +37%, AKS +30%, NUE +12%.
- Steel Dynamics (STLD +0.6%) was the latest to report a strong summer, guiding for above-consensus Q3 earnings as shipments and metal spreads are forecast to improve in spite of continued elevated import activity; Nucor did so yesterday morning (NUE +0.4%).
- Still, Credit Suisse is not ready to embrace the steel company revival, at least when it comes to AK Steel (AKS -4.8%), whose self-help story has less scope for upside surprise than US Steel (X +0.2%); one obvious contrast is that X is looking at shutting down blast furnace steelmaking capacity in North America, while AKS is buying more of it.
- ETF: SLX.
Wed, Aug. 27, 2:58 PM
- The U.S. will not go ahead with planned import duties on specialized steel from Japan, Germany and Poland after the U.S. International Trade Commission found the imports were not harming local industry.
- The U.S.-based public affairs lobby of the Japanese steel industry welcomes the decision, which came after a complaint lodged by AK Steel (AKS -2.9%) and others.
- The decision affects companies including Nippon Steel & Sumitomo Metal (OTC:NISTF) and Germany's ThyssenKrupp (OTC:TYEKY, OTCPK:TYEKF), which had been named in the dispute.
- Also: X -1.1%, STLD -0.4%, WOR -0.6%.
- ETF: SLX
Mon, Aug. 25, 10:23 AM
- South Korea is vowing to take action against U.S. anti-dumping tariffs imposed on South Korean steel pipes and tubes for oil drilling, as it worries about the impact on the country's $818M/year export of the products to the U.S.
- The ITC's confirmation of the tariffs last week is widely seen as a victory for U.S. steelmakers, especially U.S. Steel (X +2.6%), who say South Korean and other foreign competitors sold their products below cost to boost their market share in the U.S.
- South Korea could file a complaint to a U.S. court or take action at the WTO to get the punitive U.S. tariffs nullified, but analysts say the dispute isn't likely to escalate quickly.
- ETF: SLX
Tue, Jun. 17, 10:45 AM
- ArcelorMittal ([[MT] -0.3%) is fighting back against aluminum's advances in the U.S. and European auto industries by investing in fast-growing car markets, such as China and Mexico, CEO Lakshmi Mittal says.
- Mittal also challenges claims that aluminum is invariably lighter, saying the aluminum industry uses outdated data when comparing its metal to steel and that new forms of steel "can provide all the weight reduction that auto producers require to satisfy the new fuel-efficiency standards, for all types of vehicle."
- A recent report from Ducker Worldwide said 18% of all vehicles will have all-aluminum bodies by 2025 vs. less than 1% now, and that Ford’s move to use an aluminum body for its 2015 F-150 pickup signals a shift by automakers toward lightweight materials for pickups and SUVs to meet tougher fuel-economy standards.
- ETFs: SLX, JJU
Mon, Jun. 2, 7:27 PM
- Representatives of the coal and utility industries criticized proposed new U.S. emissions rules for power plants, but WSJ reports that some were relieved the outcome wasn't worse.
- The industries had been hoping the EPA would apply emission reduction standards from a baseline of 2005, and they feared the EPA draft would use a more recent, and thus tougher-to-meet baseline, but the Obama administration decided on 2005 after all.
- Coal-fired power plants won't have much difficulty meeting the EPA's mandate for a 30% reduction in carbon emissions by 2030, an industry lobbyist says, since carbon emissions from coal plants have dropped 14% since 2005 (also).
- However, coal companies and electric plants remain concerned about an earlier deadline to reduce emissions 25% by 2020; other big consumers of power, such as steel mills, say they too could have a tough time with the new rules.
- ETFs: XLE, XLU, TAN, ERX, KOL, IDU, VDE, OIH, ERY, FCG, VPU, DIG, KWT, GASL, DUG, SLX, IYE, GASX, PXJ, FENY, RYE, UPW, FUTY, RYU, FXN, FXU, DDG, SDP
Wed, May. 14, 10:46 AM
- U.S. steel imports (SLX) are approaching record levels, prompting calls for new import tariffs as well as the highest number of trade complaints in more than a decade, as a recent increase in China's steel exports heightens the tension.
- The surge in imports reflects oversupply abroad, which has cut prices, and strong U.S. demand spurred by energy drillers and a resurgent auto industry.
- A wave of U.S. trade rulings is expected this summer, but officials so far have refused to impose new tariffs on products used in drilling for oil and natural gas, which doesn't please Sen. Sherrod Brown of Ohio, who says operators of U.S. mills such as U.S. Steel (X), AK Steel (AKS) and ArcelorMittal (MT) should accept slightly higher prices for domestic steel.
Tue, May. 13, 2:08 PM
- Annual global steel oversupply is now running at more than $500M/year, twice as much as in 2001, according to a new U.S. steel industry-backed report.
- The steel industry (SLX) is facing its "biggest import crisis since 2001," and high levels of imports are continuing and are a threat to the profitability of companies such as U.S. Steel (X) and AK Steel (AKS), the report says; in Q1, imports by U.S. companies rose 36% to 10.6M tons, a trend driven by excess capacity overseas and by a strong U.S. market due to the esurgent auto industry, and oil and gas drilling.
- In response, U.S. producers are filing more trade complaints and seeking new import tariffs.
Tue, Apr. 8, 3:38 PM
- Steel companies (SLX +1.4%) are higher after Cowen analyst Anthony Rizzuto says improving steel market fundamentals are likely to provide a catalyst for steel stocks to rise.
- With Q1's bad weather now finished, the domestic steel market appears to be tightening and sentiment improving, Rizzuto says, expecting investors to focus more on the outlook for the remainder of 2014 than on Q1 results.
- The firm rates US Steel (X +3.1%), ArcelorMittal (MT +2.5%) and Reliance Steel (RS +0.3%) at Outperform; AK Steel (AKS +5.9%), Nucor (NUE +1.7%) and Steel Dynamics (STLD +1.3%) are Market Perform.
Tue, Feb. 11, 10:14 AM
- U.S. Steel (X -0.5%) is downgraded to Sell from Neutral with a price target cut to $23 from $28 at Citigroup after shares have climbed more than 35% in six months.
- The company appears stronger with new management removing costs, but this may not be enough in a falling price environment, Citi says.
- Credit Suisse also is out cautious on the steels (SLX), believing that a natural gas price spike could leave steel producers in the cold.
- Meanwhile, Steel Dynamics (STLD +2.9%) is upgraded to Buy from Neutral at BAML, which notes that STLD generates a strong cash flow.
Tue, Jan. 7, 2:59 PM
- In his analysis of the steel sector (SLX), UBS analyst Matt Murphy prefers mini-mill producers Nucor (NUE +0.4%) and Steel Dynamics (STLD +0.5%) with their low cost structures and upside to non-residential construction recovery in 2014, while expressing reservations about US Steel (X -0.5%) and concerns about AK Steel's (AKS +1.6%) cash burn in 2014.
- Murphy hopes for significant cost savings at US Steel from Project Carnegie but thinks the transformation will take time.
- The analyst also raises his 2014 EPS forecasts on Buy-rated STLD and NUE due to stronger anticipated long-product demand growth.
Oct. 22, 2013, 9:53 AM
- UBS steel analysts are cautiously optimistic on a return to growth for the steel industry (SLX), believing steel demand is heating up and the auto and manufacturing sectors can drive growth forward.
- UBS actually sees steel prices falling next year, but producers that have lowered costs and restructured are poised to perform well; the firm likes Nucor (NUE +0.4%) and Steel Dynamics (STLD +0.3%) as stocks to buy.
- However, higher fixed and legacy type costs will have a severe impact on other well-known names in the sector; the firm downgrades U.S. Steel (X -0.8%) and Reliance Steel (RS -0.1%) to Neutral while AK Steel (AKS +0.2%) and ArcelorMittal (MT -1%) are cut to Sell due to deteriorating fundamentals.
Sep. 20, 2013, 10:07 AM
- AK Steel (AKS -9.6%) plunges in early trading after issuing disappointing Q3 guidance which included a projected 5%-6% decline in shipments.
- Further problems were outlined at the Middletown blast furnace in Ohio, where a loss of $0.09/share is foreseen due to the previously disclosed unplanned outage.
- Shares had surged by nearly a third since the start of the month, so they seem primed for a fall, Cowen analysts say.
- X -3.2%, MT -2.1%, STLD -1.2%, NUE -0.2%.
- ETF: SLX.
Sep. 18, 2013, 3:59 PM
- BMO initiates coverage of steel companies (SLX) Nucor (NUE +2.7%), Commercial Metals (CMC +2.3%), U.S. Steel (X +2.6%) and Steel Dynamics (STLD +0.9%).
- NUE, started at Outperform with a $54 price target, is arguably the best of breed, with the highest margins in the group and best balance sheet; it also has best execution and benefits from growing low-cost DRI production.
- CMC also is initiated at Outperform; it trades at the lowest valuation in the steel sector based on adjusted EV/EBITDA, dividend yield and free cash flow yield, and is leveraged to non-residential construction expected to improve over the next one or two years.
- X is started at Market Perform; its balance sheet is by far the most stretched of the group at 5x net debt to EBITDA for FY2013, and there is potential for dilution from an out-of-the-money convertible bond due in 2014.
- Earlier: STLD is started at Market Perform.
Sep. 12, 2013, 7:48 AM
- The gathering pace of infrastructure projects and consumers' need to restock will fuel a rebound in China's commodity usage through the end of the year, says Goldman. "People are getting more positive, but they’re not super bullish, not yet,” said Goldman's Julian Zhu. “You’re going to see further upside. If you look at the early indicators in September; it seems like the overall economic activity is picking up."
- Steel prices in particular are expected to be stronger, says Zhu. Re-bar futures in Shanghai closed at $3,713 per metric ton last night, continuing a 3-month run of higher prices, the longest streak since 2010/11.
- Broad commodity ETFs: DJP, GSP, LSC, RJI, GSC, GCC, GSG, DBC, DPU, DJCI, UCI, USCI, DYY, UCD, DEE, CMD, DDP, RGRC, CTF, CFD CSCR, CSCB.
- Broad base metal ETFs: JJM, RJZ, BDG, DBB, UBM, BDD, BOM, BOS, USMI, RGRI.
- Steel: SLX.
Aug. 12, 2013, 3:09 PM
- Steel stocks pick up where they left off last week - with more gains - thanks largely to optimism over Chinese industrial growth: CLF +1%, X +1.9%, AKS +3.9%, STLD +2.7%, SID +1.5%.
- Wells Fargo explains: Sheet pricing continues to march higher (albeit temporarily due to supply disruptions), the commodity market got a boost from improved sentiment on China (upped steel production forecasts and recorded record iron ore imports), and steel imports into the U.S. have moderated.
- Examining the charts, Bespoke says if the steel ETF (SLX +0.6%) can soon break above a key resistance level that formed in May, traders may be looking at a new long-term uptrend forming.
SLX vs. ETF Alternatives
The Steel ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Steel Index. The Index provides exposure to publicly traded companies primarily involved in a variety of activities that are related to steel production, including the operation of manufacturing mills, fabrication of steel products, or the extraction and reduction of iron ore. As such, the Fund is subject to the risks of investing in this sector.
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