What U.S. Steel's Rough May Could Mean for June PART 6 OF 7
What US Steel Investors Are Watching in June
By Mark O'Hara | Jun 2, 2017 12:37 pm EDT
US steel investors
In previous parts of this series, we looked at steel companies’ May price actions. In this part, we’ll look at the key data points that steel investors will be watching out for in June.
What US Steel Investors Are Watching in June
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Chinese exports
China’s May trade data is scheduled for June 8. Chinese steel exports have been among the biggest challenges for the global steel industry (MT) (X). However, we saw a sharp yearly fall in Chinese steel exports in the first four months of the year as strong domestic demand prevented China’s rising steel production from flooding international markets.
That said, we also saw Chinese steel production hit a monthly record last month, while the country’s demand indicators including manufacturing PMI (purchasing managers’ index) and car sales showed signs of moderation.
Demand indicators
Meanwhile, China’s most recent manufacturing PMI has given divergent signals. While the official PMI came in better than expected, the Caixin survey, which focuses on small and medium enterprises, showed contraction. To be sure, steel investors will be watching Chinese demand indicators closely for a sense of the country’s steel demand (NUE) (AKS).
Specifically, investors will be eyeing China’s May real estate, fixed asset investments, and car sales data, as these sectors are among the biggest steel consumers (XLB). If we see an increase in Chinese exports amid softening domestic demand, it could hamper the steel industry’s recovery.
Meanwhile, trade actions have helped the US steel industry protect itself from the onslaught of Chinese steel exports—at least in their direct form. At the same time, we’ve seen a gradual increase in US steel imports as other countries have filled the gap. For this reason, attentive steel investors will be following May US steel import data, which should be released on June 23.
In the next and final part of this series, we’ll discuss which steel stocks markets are eying more bearishly than others.
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PART 7
What U.S. Steel's Rough May Could Mean for June PART 7 OF 7
Steel Investors Are Most Bearish on These Stocks
By Mark O'Hara | Jun 2, 2017 12:37 pm EDT
Bearish steel investors
In the previous part of this series, we examined the key events that steel investors will be monitoring in June. In this final part of our series, we’ll discuss short positions in steel stocks (XME).
Remember, short interest tells us the number of shares that have been sold short. This data is released every two weeks. From short interest, we derive a ratio of days it would take investors to cover their short positions, or short interest divided by the average daily traded volume. This days-to-cover ratio helps us standardize short interest, as more liquid companies tend to have higher absolute short interest.
Steel Investors Are Most Bearish on These Stocks
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Days to cover
According to the latest update on May 15, 2017, U.S. Steel’s (X) days-to-cover or short interest ratio stood at 0.93. This ratio has risen from the previous update, when U.S. Steel’s short interest ratio was 0.81 on April 28. Nucor (NUE) and Steel Dynamics (STLD) had a short interest ratios of 2.29 and 2.82, respectively, on May 15. AK Steel’s (AKS) short interest ratio was 2.29 on the same day.
ArcelorMittal (MT), the world’s largest steelmaker, has seen a steep increase in its short interest. The stock’s short interest ratio stood at 5.5 on May 15, as compared to 1.57 on April 28. Based on the most recent update, MT has the highest short interest ratio among the steel stocks that we’ve been covering in this series.
What can we infer?
It’s worth noting that while a higher short interest ratio indicates bearish sentiment, it could also trigger a short squeeze in the case of a positive news flow. Investors will recall that many bears were caught unaware in 1Q17, when rising steel prices triggered a steep rally in steel stocks.
You can read Market Realist’s series Analyzing the Steel Industry’s Demand-Supply Balance in 2Q17 to explore recent steel industry indicators.