Steel Warning and Discussion via /r/wallstreetbets #stocks #wallstreetbets #investing

Steel Warning and Discussion

Disclosure: I am not a financial advisor and do not hold a position in any mining companies. Do your own DD. Doing this on my phone at work so forgive the typos.

Here is a basic overview of steel and why I haven’t jumped in. I was scanning through a weekly report on miners at my work and was saddened by the loss of the tendies I have been seeing.

Supply Side -World steel production has been steadily increasing since 2015 -Covid has caused a shortage of steel, which has driven up prices -Supply has caught up with utilization according to Bloomberg (can’t attach chart due to rules regarding external use of information for my job)

Demand Side -Top three uses of steel globally are construction 51%, mechanical equipment 15%, automotive 12% -There is an excess of commercial real estate in the US. It is likely demand will continue to drop with the work from home movement -National infrastructure projects will likely increase in the next few years -State and local construction will slow down do to missed revenue and budget constraints -New automotive sales will likely decline because used car prices are continuing to increase, this implies people are buying used and driving longer

Potential tailwind is a weakening USD but this will cause all imports to rise.

I’m not a steel bear, just trying to think through the trade and the time table. This is not 2008. History does repeat itself but rarely does it do so in the exact same way.

Tldr: Steel demand will likely decrease while supply increases over the next few months.

Submitted December 29, 2020 at 07:37PM by scrtmgmt
via reddit

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