Steel prices pick up, pushing the U.S. steel sector to continue to strengthen

　　As the economic data in the United States and Europe continued to improve, especially the growth data of China's industrial output was better than expected, the steel sector of the U.S. stock market was affected by the rise in steel prices and continued to strengthen recently. Since the end of June, the U.S. stock steel ETF has risen by nearly 20%, and has risen by 8% in the past four trading days alone. The major constituents have performed well. Analysts said that if the ETF can break a key resistance level in the next few days, it will lay the foundation for a new long-term uptrend.

　　Steel stocks continue to rebound

　　Boosted by better-than-expected Chinese industrial output data, the U.S. steel sector extended its previous gains on the 12th. As of the close of the day, AK Steel Holdings (NYSE: AKS) rose 5%, and the cumulative increase since the end of June reached 25%; Cliff Natural Resources (NYSE: CLF) rose 0.5%, and the increase since the end of June reached 56%; U.S. Steel (NYSE: X) rose 2%, up 17% since the end of June; Steel Dynamics (NASDAQ: STLD) rose 3%, up 15% since the end of June; Vale (NYSE: VALE) rose 1%, 6 It is up 21% since the end of the month.

　　Steel prices pick up, pushing the U.S. steel sector to continue to strengthen

　　The U.S. steel sector has been performing well recently. With the recovery of iron ore prices, the U.S. steel ETF (SLX) has risen nearly 20% since the end of June, and has risen by 8% in the past four trading days alone. However, the sector has still significantly underperformed the market this year. The U.S. steel ETF has fallen 15% this year, while the S&P 500 has risen 18%.

　　Even factoring in the recent rebound, the major steel sector stocks have been sluggish this year. Shares of Cliff Natural Resources have fallen 37% this year, AK Steel is down 21%, U.S. Steel is down 26% and Vale is down 27%.

　　Analysts believe that the accelerated recovery of global economic growth is one of the important factors driving the rebound of the steel sector. The U.S. stock market had a strong short-selling sentiment on the steel sector before, but the market sentiment has improved recently with the release of better-than-expected economic data from the United States, Europe and China.

　　In addition, some analysts pointed out that the valuation of the steel sector is lower than the historical average level, which is also attractive to investors. Generally speaking, the steel industry tends to use price-to-sales ratios to measure valuation levels. Statistics show that ArcelorMittal and U.S. Steel's price-to-sales ratios are well below historical averages.

　　Demand improves and steel prices pick up

　　A broad and stable global economic recovery has been the main catalyst for recent gains in steel stocks. Recent data showed that the U.S. manufacturing purchasing managers' index (PMI) rose sharply to 55.4 in July, the highest level since June 2011, and the euro zone manufacturing PMI hit a two-year high and returned to expansion territory. While emerging market economies are doing just fine, strength in Europe and the U.S. helped boost exports.

　　After a 15% plunge in the second quarter, iron ore prices entered a bull market at the end of July, driven by China's replenishment of inventories and an increase in steel production. Prices at major steel producers in China and Asia rebounded in July, with some major producers announcing price hikes one after another, driven by rising raw material prices and the need to rebuild inventories at terminals.

　　In Europe, European steel spot prices began to recover in mid-July after 20 consecutive weeks of declines. Major producers, including ArcelorMittal and Italy's Garry Group, have announced price hikes in July, August and September, citing rising raw material prices, a modest recovery in demand, and rising confidence in end-users to rebuild inventories.

　　In the United States, as steel producers AK Steel and U.S. Steel cut supply, steel prices began to rise at the end of June and achieved their first monthly rise this year in June. Structurally, the U.S. steel market is doing better than Europe because of the stronger U.S. economic recovery.

　　ArcelorMittal expects steel demand in the US, Europe and China to improve in the second half of the year. Low inventory levels in the US and Europe will continue to support the price recovery. U.S. steel industry earnings may continue to improve in the third quarter, benefiting from rising demand from U.S. manufacturing. Vale said the massive drawdown in steel inventories in recent months has opened the way to support consumption growth.

　　Some analysts also pointed out that although there is evidence that global demand is rising, the steel market has not undergone a fundamental change, and excess production capacity is still serious, especially in China. Unless the global economy recovers strongly, the steel market will remain volatile rather than steady growth, a U.S. trader said.