U.S. hot-rolled steel prices are up about 50% year to date. Higher pricing has fueled the sector’s stock price rally.
Morris Mac Matzen/AFP via Getty Images
U.S. steelmakers are sensing just how unhappy China is about high iron ore prices.
Their stocks generally fell on Friday, pushed down by iron ore prices that the Chinese government is trying to rein in.
United States Steel (ticker: X), Steel Dynamics (STLD), and Cleveland-Cliffs (CLF) were off 1.8%, 0.2% and 3.5%, respectively in midday trading. Nucor (NUE) managed a 1.1% gain. Steel distributor Reliance Steel & Aluminum (RS) is down 1.3%.
The rest of the market was doing well. The S&P 500 and Dow Jones Industrial Average were up 1.4% and 1%, respectively.
Friday’s iron ore futures prices touched off the stock declines, dropping almost 10% on reports that the Chinese government has asked steel mills to help control the surge in pricing. China is the world’s largest steel producer, with roughly 55% of all steelmaking capacity.
Iron ore is a raw material key to making steel. Higher ore prices push up steel prices. Higher steel prices hurt Chinese manufacturers’ ability to make money.
Iron ore prices are running at about $200 a metric ton, and about 1.5 tons of ore make a ton of steel. Prices were up almost 30% year to date coming into Friday.
Prices for hot-rolled steel, a key benchmark, haven’t moved on the Chinese ore futures. A ton of hot-rolled steel currently costs about $1,500. If lower ore pricing holds, though, the price for finished steel will eventually drop around the globe.
U.S. hot-rolled steel prices are up about 50% year to date. Higher pricing has fueled the sector’s stock price rally.
Shares of U.S. Steel, Nucor, Steel Dynamics and Cliffs are up 61% year to date on average. That quartet is up more than 240% on average over the past 12 months.
Write to Al Root at [email protected]
