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Stronger Than Ever: Steel Rebounds to Start the Year

March 17, 2023

Read Time 3 MIN

An expected rise in infrastructure spending, increased demand overseas, and a recovery in automotive production all support the steel industry’s positive outlook.

The steel industry started the year with a bang. Prices for the commodity have rebounded from the low at the end of last year, with various producers announcing price hikes from December into February. While rebar and plate prices are still off from the extreme levels seen about a year ago, they are up modestly to start the year and may be poised to move higher. Spreads on rebar and plate steel have compressed some with the rise in input prices; however, they are still above historical averages and expected to remain there. With a seasonally stronger period on the horizon and other factors, including the U.S. Infrastructure Act, a recovery in automobile production and demand from overseas, the steel industry is well-positioned for a continued rebound.

Steel Prices Rebound

FIBER US Commodity Steel Spot Price | 9/1/22 - 3/12/23

FIBER US Commodity Steel Spot Price | 9/1/22 - 3/12/23

Source: Bloomberg. FIBER (Foundation for International Business and Economic Research) US Commodity Steel Spot Price Index represents the average steel prices for No.1 heavy melt steel from Chicago, Philadelphia and Pittsburgh. Past performance is no guarantee of future results.

Increased Infrastructure Spending Provides Boost

An expected rise in spending on U.S. infrastructure is set to boost the steel industry's outlook in the coming years. The Infrastructure and Jobs Act signed into law last November provides $550 billion in new funding over the next several years. This spending is expected to increase domestic steel consumption by roughly 17%.1 The boost in U.S. infrastructure spending could help mitigate any moderating economic growth and support demand for steel. Spending on renewable-energy projects, like wind turbines, is also expected to provide additional demand for steel.

Expected Demand Overseas

Strong demand from overseas is expected to support the steel industry's positive outlook. Domestic plate prices should be supported by a healthy export market, given Ukraine supplied an estimated 30% of Europe's plate - a void that will need to be filled.1 It is also expected that the reconstruction plans in Turkey, following the recent earthquakes that decimated the country, will keep prices elevated for the rest of the year. The Turkish government has said it will require over millions of tons of rebar and is expected to begin reconstruction plans in the coming months. Additionally, China's easing of strict Covid-19 measures and its plan for rapid economic recovery is expected to support iron ore prices and steel demand.

Automotive Recovery to Aid Steel Outlook

Lastly, the automotive industry, one of the key end-markets for steel with each vehicle using almost a ton, is expected to support demand for the steel industry. The chip shortage over the past year hampered automotive production and related steel demand. However, now the chip shortage is beginning to alleviate, and increased automobile production is expected to boost demand for steel, aiding the steel industry's outlook.

In conclusion, the steel industry is set for a continued rebound, with increased infrastructure spending, expected demand overseas and a recovery in automotive production all contributing to the positive outlook. Investors should keep an eye on the global steel industry as an interesting area of the market.

Accessing the Steel Industry

The VanEck Steel ETF (SLX) seeks to replicate as closely as possible, before fees and expenses the price and yield performance of the NYSE Arca Steel Index (STEEL), which is intended to track the overall performance of companies involved in the steel sector. SLX is the only ETF covering steel specifically, investing in companies primarily involved in activities related to steel production, including mill operation, steel fabrication, and the extraction and reduction of iron ore.

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Important Disclosures

1 Source: Bloomberg; North America Steel 2023 Outlook; March 6th, 2023.

Source for all data unless otherwise noted: Bloomberg.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its employees.

An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

An investment in the VanEck Steel ETF (SLX) may be subject to risks which include, among others, investing in steel companies, Brazilian issuers, foreign securities, emerging markets issuers, foreign currency, depositary receipts, basic materials sector, small- and medium-capitalization companies, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. Small- and medium-capitalization companies may be subject to elevated risks.

NYSE Arca Steel Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by VanEck ETF Trust (the “Trust”) in connection with VanEck Steel ETF (the “Fund”). Neither the Trust nor the Fund is sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding the Trust or the Fund or the ability of the NYSE Arca Steel Index to track general stock market performance.

ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA STEEL INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

Important Disclosures

1 Source: Bloomberg; North America Steel 2023 Outlook; March 6th, 2023.

Source for all data unless otherwise noted: Bloomberg.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its employees.

An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

An investment in the VanEck Steel ETF (SLX) may be subject to risks which include, among others, investing in steel companies, Brazilian issuers, foreign securities, emerging markets issuers, foreign currency, depositary receipts, basic materials sector, small- and medium-capitalization companies, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. Small- and medium-capitalization companies may be subject to elevated risks.

NYSE Arca Steel Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by VanEck ETF Trust (the “Trust”) in connection with VanEck Steel ETF (the “Fund”). Neither the Trust nor the Fund is sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding the Trust or the Fund or the ability of the NYSE Arca Steel Index to track general stock market performance.

ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA STEEL INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.