By Paulo Santos:
Upon publishing my article “Steel Is In China’s Hands” I received dozens of comments and feedback. My theory in that article was that given China’s dominant position in the world’s steel market, where it accounts for around 46% of the entire world output, and the expected slowdown in China’s economy, whose expansion is dominated by investment, it was likely that the world would see an extraordinary oversupply of steel. This meant that although steel shares have been thoroughly punished already, their upside can be limited and there might actually be a lot of potential downside.
I expected a strong reaction, and the reason is simple. If the present steel cycle was like past steel cycles, we should instead be talking about the upside that these shares have. With the auto and housing markets on the U.S. in the mend, steel demand in the U.S. is sure to go up, and