The Stocks of Steel

During the last cycle steel stocks were top performers and multiplied many times over. Everything that could go right for the steel producers did. Going into the cycle the steel industry saw a huge consolidation as many inefficient producers were bankrupted. There was very little overcapacity in the industry at the beginning of the cycle. The last upturn was a construction and real estate led boom. Steel's main use is in construction.

Going into the current cycle, the outlook is not nearly as good for the steel producers. A lot of capacity was brought on line during the last cycle, as new plants were built to keep up with the demand from the construction boom. In addition, the developed countries have a glut of new buildings and there is little reason for new construction. Investors who are looking for a repeat of the last cycle will be sorely disappointed.

1 comment:

Anonymous said...

Will S&P break the 50dma? 1050? We shall see. Nasdaq already did!