Solid Steelmaker Earnings Build Up ETF

Tom Lydon
updated | Author's Website

The steel exchange traded fund (ETF) has been showing strength that’s typical of the metal, after two major players in the industry reported big earnings.

U.S. Steel Corp. (NYSE:X) gained 14% in trading yesterday after reporting a second-quarter profit that more than doubled, which was its best gain since 2002, reports Eric Martin for Bloomberg. The company is the second-largest U.S.-based steelmaker in terms of market value. Their per-share profit handily beat the average analyst estimate.

U.S. Steel also expects the growth to keep coming in the third quarter. Price increases in the three segments of the company – flat-rolled, European operations and tubular – outpaced the increase in the cost of raw materials. Shipments also hit record levels, according to the Associated Press.

This morning, ArcelorMittal SA (MT.AS) followed up with a similar report that its own profit had more than doubled, reports Aoife White for the Associated Press. The world’s largest steelmaker increased prices to offset higher costs for energy and iron ore.

Rio Tinto (NYSE:RTP), meanwhile, said it will pour $2.2 billion into an expansion o fits iron ore mine in Brazil to help meet the demand throughout South America and the Middle East, the Associated Press reports. Iron ore is a key ingredient in steel production.

Will the global demand for steel keep up the pace? ArcelorMittal predicts growth of 3% to 5% a year in the medium term, which is down from 7% in recent years.

According to the World Coal Institute, China is the top steel producer, and accounted for 34% of production in 2006. China is also the world’s top consumer of steel.

Market Vectors Steel (SLX) holds U.S. Steel at 5%, 13.4% of ArcelorMittal and 13.7% of Rio Tinto. The fund is 2.4% below its trend line.

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