China Steel Mills Won't Close Over New Year Given Demand
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Investors in U.S. steel company stocks may react to news out of China that steel mills there are not closing for the Chinese New Year given increased demand.
While the news out of China could be a positive indication for prices, if the demand does not materialize it could in fact be a negative. United States Steel Corp. (NYSE: X) warns investors that any excess Chinese supply could have a major impact on world steel trade and prices.
From United States Steel 10-K:
Over the last several years, steel consumption in China and other developing economies has increased at a rapid pace. Steel companies have responded by rapidly increasing steel production capability in those countries and published reports state that further capacity increases are likely. Steel production capability, especially in China, now appears to be well in excess of China's home market demand. Because China is now the largest worldwide steel producer by a significant margin, any excess Chinese supply could have a major impact on world steel trade and prices if this excess and subsidized production is exported to other markets. Since the Chinese steel industry is largely government owned, it has not been as adversely impacted by the ongoing difficult economic conditions, and it can make production and sales decisions for non-market reasons.
Steel Companies to Watch:
U.S. Steel Corp. (NYSE: X), AK Steel (NYSE: AKS), ArcelorMittal (NYSE: MT), Nucor Corporation (NYSE: NUE), Steel Dynamics Inc. (NASDAQ: STLD)
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While the news out of China could be a positive indication for prices, if the demand does not materialize it could in fact be a negative. United States Steel Corp. (NYSE: X) warns investors that any excess Chinese supply could have a major impact on world steel trade and prices.
From United States Steel 10-K:
Over the last several years, steel consumption in China and other developing economies has increased at a rapid pace. Steel companies have responded by rapidly increasing steel production capability in those countries and published reports state that further capacity increases are likely. Steel production capability, especially in China, now appears to be well in excess of China's home market demand. Because China is now the largest worldwide steel producer by a significant margin, any excess Chinese supply could have a major impact on world steel trade and prices if this excess and subsidized production is exported to other markets. Since the Chinese steel industry is largely government owned, it has not been as adversely impacted by the ongoing difficult economic conditions, and it can make production and sales decisions for non-market reasons.
Steel Companies to Watch:
U.S. Steel Corp. (NYSE: X), AK Steel (NYSE: AKS), ArcelorMittal (NYSE: MT), Nucor Corporation (NYSE: NUE), Steel Dynamics Inc. (NASDAQ: STLD)
Link
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