Steel stocks took a beating all week, as US Steel (NYSE:X), AK Steel (NYSE:AKS), Nucor (NYSE:NUE) and Arcelor Mittal (NYSE:MT) stock charts all looked like you were going down a mountain. One exception was Gerdau S.A. (NYSE:GGB), which while losing share price during the week, wasn't as pronounced as the others.
All of this is based on the economic sovereign debt crisis in Europe, as well as the belt tightening of China, which will result in lowered demand for steel, and is also lowering the price of iron ore.
US Steel is particularly exposed to Europe, which could cause them problems in the long run, as that's a challenge that isn't going to go away any time soon.
US Steel finished the week at $41.99, down Friday by $3.29, or 7.27 percent.
The week for AK Steel ended at $13.34 a share, down on Friday by $1.14, or 7.87 percent.
Nucor ended the last five trading days at $40.93, dropping on Friday by $1.61, or 3.78 percent.
For Arcelor Mittal, they came in at $27.50 for the end of the week, plunging on Friday by $1.63, or 5.60 percent.
Gerdau S.A. finished the trading week at $13.01, down $0.64 on the day, or 4.69 percent.
With this precipitous weekly drop in steel stocks, there is sure to be a rebound based on that and nothing else, the reason why some say they like the stocks now.
That's primarily based on current valuations and not related to fundamentals and the macro-economic realities they're facing.
Long-term the steel industry and companies heavily exposed to it should struggle, especially those with heavy exposure to Europe, which is guaranteed to be a slow economy for some time to come, if not poised to go back into a recession, if they're not already there.
China's different only in the clarity isn't there yet as to how the austerity measures they're taking will impact the steel and other industries.
While China will no doubt continue to grow, it won't be at the 12 percent or higher rates it has been in the recent past. More than likely it'll start to come down to a more reasonable 7 to 8 percent rate in the near term.
With the U.S. economy about level at this time, and the combination of Europe and China, it'll have a dramatic impact on the commodity sector in general, and steel industry specifically.
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