Shares of several prominent steel companies are trading at an all-time high despite the recent correction in steel prices and unimpressive financial performance.
This anomaly provoked us to explore the factors fueling this rally. Swipe to know what we discovered.
The US Federal Reserve has hinted at 3-4 rate cuts in FY24. This is expected to lower steel prices and boost earnings for steel makers.
The Chinese government is also lowering interest rates and reserve rate requirements. The last time this happened, it led to a bull run in commodity prices.
The macro tailwinds and rising domestic demand provide a promising outlook. But there are risks you should consider.
The market may have already priced in the anticipated demand increase. The current high prices of steel stocks may limit future gains.
The steel industry is known for its volatility. The demand outlook could be disrupted by geopolitical tensions or other external shocks.
Broader economic trends do not guarantee success for all steel companies. Investors should do the due diligence before investing.
To read a more detailed take on the subject, swipe up.