SLX: Thou Shalt Not Steel - For The Moment, At Least

seekingalpha07-28

maximili The VanEck Steel ETF (NYSEARCA:SLX) is a surprisingly small fund with assets of under $100 million. When you look at the flat price path the fund has taken over the course of 2024, it’s less ...

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When you look at the flat price path the fund has taken over the course of 2024, it’s less ...</p>\n\n<a href=\"https://seekingalpha.com/article/4707532-slx-etf-moment-not-right-to-invest-in-steel\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SLX: Thou Shalt Not Steel - For The Moment, At Least</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSLX: Thou Shalt Not Steel - For The Moment, At Least\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-28 21:14 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4707532-slx-etf-moment-not-right-to-invest-in-steel><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>maximili The VanEck Steel ETF (NYSEARCA:SLX) is a surprisingly small fund with assets of under $100 million. When you look at the flat price path the fund has taken over the course of 2024, it’s less ...</p>\n\n<a href=\"https://seekingalpha.com/article/4707532-slx-etf-moment-not-right-to-invest-in-steel\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4550","symbol_name":"红杉资本持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4707532-slx-etf-moment-not-right-to-invest-in-steel","article_id":"2454525839","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/937862426/image_937862426.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2454525839","pubTimestamp":1722172456,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"maximili The VanEck Steel ETF (NYSEARCA:SLX) is a surprisingly small fund with assets of under $100 million. When you look at the flat price path the fund has taken over the course of 2024, it’s less ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4550":"红杉资本持仓","BK4588":"碎股","BK4168":"多种金属与采矿","RIO":"力拓","SLX":"VanEck Steel ETF","RIO.AU":"力拓","BK7095":"多种金属与采矿","BK7511":"ESG概念","BK7507":"资源股","FDN":"First Trust Dow Jones Internet I","BK4585":"ETF&股票定投概念"},"translate_title":"SLX：你不应该是钢铁——至少现在是这样","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SLX":1,"RIO":1,"RIO.AU":1,"FDN":0.89,"US5Y.BOND":0.8,"US3Y.BOND":0.8,"US30Y.BOND":0.8,"US2Y.BOND":0.8,"US12M.BOND":0.8,"US10Y.BOND":0.8,"US6M.BOND":0.8,"US7Y.BOND":0.8,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6},"content_text":"maximili The VanEck Steel ETF (NYSEARCA:SLX) is a surprisingly small fund with assets of under $100 million. When you look at the flat price path the fund has taken over the course of 2024, it’s less than inspiring, and it puts that AUM in much better context.   SA Even over the entire duration of its existence since October 2006, the fund has performed in a cyclical but rather sideways manner. The Global Financial Crisis hit the fund hard after barely two years of operations, and although its NAV has tried several times to claw its way back up to the +$100 level it saw right before the crisis struck nearly all the world’s economies, it was barely able to breach $75. It’s also a highly illiquid fund at the moment, which makes sense because the forecasts for steel range between a declining demand on the pessimistic side and strong demand growth over the next decade on the optimistic side. Sources such as Eurofer have this sub-optimal outlook for this year and a modestly optimistic view of 2025: In 2024, growth in steel-using sectors is projected to drop (-1.6%, previously set at -1%), due to the second recession in a row in the construction sector, persistent geopolitical tensions, and the lagged impact of high interest rates on the overall manufacturing sector. Moderate growth is expected to resume moderately (+2.3%) in 2025. Globally, however, the outlook is a little more on the optimistic side. Per the World Steel Association, as reported by Reuters in April 2024:  Global steel demand is expected to rise by 1.7% to 1.793 billion metric tons in 2024 and to increase further in 2025, the World Steel Association said on Tuesday. The association expects India to be the main driver of demand growth as Chinese demand continues to decline.  Let’s explore some of the reasons why this ETF is essentially a non-mover but may benefit from development projects in emerging markets and even the U.S. and Europe once the high interest rates subside and inflation levels are back on track at under 2% in the most important markets. Unfortunately, any bullish thesis around steel must necessarily be linked to a long-term investment horizon, which is why assigning it a Buy requires a specific set of factors to align with each other. For now, this is most definitely a Hold. SLX and the Steel Saga SLX primarily invests in companies that mine iron ore and other metals and minerals, as well as downstream processors. Its largest holding, Rio Tinto (RIO) made $32.25 billion from its iron ore segment, with aluminium coming in at a distant second with $12.29 billion. Its total holdings are also made up of minority investments in the industrials (15%) and energy (5%) sectors. Therefore, much of the fund’s performance depends not only on mining, processing, and other supply-side components, but also on the consumption side of the equation. And that’s where the problem seems to lie. On the one side, even though some markets saw hefty production declines of as much as -9%, global crude steel production still grew by 0.5 million tonnes in June 2024.   World Steel Association Against this fairly steady, albeit cyclical, production schedule, demand has reduced, sending futures prices down as major developed markets still struggle with high interest rates that are impacting nearly every industry that depends on steel. The problem with demand being depressed now is clearly reflected by HRC Steel Futures prices.   MarketWatch As you can see, as recently as two months ago, hot-rolled steel December 2024 futures were trading at peaks above $850/st (short ton). As of two days ago, December futures were testing a bottom of $780. That’s a clear sign that medium-term pessimism persists. Closer-dated futures are trading even lower, with August 2024 futures recently testing lows near $652/st. Economic Hurdles Although emerging markets seem to be showing promise for steel consumption, particularly India, which is expected to see an 8.2% increase in steel demand for 2024, the all-important Chinese market is currently seeing a declining PMI (Purchasing Managers’ Index) for its steel industry.  China's Purchasing Managers' Index (PMI) for its steel industry scored 47.8 in June, easing by 2 percentage points from May after rising for two months, the official index compiler CFLP Steel Logistics Professional Committee (CSLPC) declared in its latest release on June 30. The result suggested that the country's steel sector weakened last month, CSLPC said, noting that both domestic steel demand and production declined, and that prices of raw materials and finished steel products had trended downward, even though mills' steel margins recovered moderately.  In developed markets like the United States, however, indicators like the Manufacturing PMI have been on the decline since March 2024, pegged at 50.3% then vs 48.5% in June 2024. So, demand in the domestic market is clearly seeing downward pressure, and although infrastructure spending is expected to boost the demand for products like steel, we’re not seeing any signs of that yet. One of the major hurdles is the prevalence of prolonged high interest rates. The Fed’s attempts at dampening the economy is clearly working on the demand side, as evidenced by depressed steel futures prices, so it is now a question of when the Fed might start its rate-cutting efforts. If you look at the June dot-plot, it looks like we might only get one 25bps cut this year.   Bankrate Naturally, the implications on the Fed’s policy rates from a political standpoint needs to be taken into consideration, and if former president Donald Trump is re-elected, it’s very likely that we won’t see any interest rate cuts in the near term. His view on that has been unequivocal: Right now, you have to keep rates where they are… Inflation is a country buster. In Summary So, on the one side, you have reasonably strong production levels that are still rising across the globe, and there’s adequate demand in Asia (ex-China) and Africa to absorb a lot of that excess supply; but on the other, developed markets like North America and Europe are still seeing a lot of downward pressure due to demand not growing alongside supply, thereby impacting prices. That’s my key bearish thesis against investing in a steel fund like SLX. Although the fund performed quite well since the 2020 recessionary dip that affected all markets, its recent performance clearly shows a bearish pattern.   SA The rising wedge indicates that the ETF has done well overall, but the contraction over time is clearly bearish. The fund could do well in the short-term, but until we get more clarity on the direct signals from the industry in terms of strong demand experiencing a revival in developed markets, it’s better to stay on the sidelines. The TTM dividend yield of nearly 3% might make the ETF look attractive, but I would recommend waiting for those signals to be clearly exhibited. SLX is likely to head lower as the election approaches, and you might just find yourself a nice entry point with a much higher yield that gives you a little more downside protection. The lower highs and lower lows over the past six months could well be a strong sign that the bottom isn’t here yet. I’d recommend a Hold for now, with a view to add to your position as it approaches $60, which is essentially a 14% drop from the current $70. The forward dividend is expected in the range of $2.0667 - $3.7609, translating to a forward yield of 2.95% to 5.3% at the current price. However, that wide range panning out in favor of the upper end would depend on SLX’s performance over the next six months heading into the ex-date of December 23, 2024. If the ETF does seek a bottom near $60, that would make it a clear Buy in my opinion. Until then, be steel my beating heart.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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