China’s production cuts caused a global supply crunch and pushed steel and iron ore prices higher in 2021. Although domestic steel producers have since benefited, the war between Russia and Ukraine, two major participants in the international steel trade, has been exacerbating the global shortage, thus driving steel prices even higher.
Domestic steel manufacturers are raising prices to capitalize on the growing demand and to combat rising input costs due to high oil, natural gas, and electricity prices. Also, significant funding from the bipartisan infrastructure bill passed last fall, along with the easing of tariffs on steel imports from the EU and Japan, should drive the industry’s growth in the future. Investors’ interest in this space is evidenced by the VanEck Vectors Steel ETF’s (SLX) 6.4% gains over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. The global iron and steel market is expected to grow at a 2.9% CAGR to$1.88 trillion by 2028.
