I did pretty well on steel in 2006. I would think they would continue to do well in 2007. Does anyone think Steel stocks will continue down, or will they correct?
Think of how steel is produced. You have a blast furnace. The furnace can either be turned on and then they have to maintain full production or you must turn it off and there is no production. You either have full production or no production. Then think of where the economy is headed. Down. Next, think of the Chinese and their huge steel industry. The Chinese are socialists and cant lay anyone off like the American steel industry can. Next, look at the Baltic Dry Index. Wow! Up nearly double in a year and its not because their shipping oil. Their shipping steel around the world. So you have the Chinese dumping steel everywhere they can. They are churning out as much steel as they can. . .Now what will that do to X?
That's why the major steel coprs have more than one mill. It's been "heading down" for years, there is more to the equation. The Chinese don't want to lay off anyone, their goal is to employ as many village peasants as possible and urbanize. That's why they are perfectly fine with so many bad loans, unprofitable businesses and a GDP composed of foreign investment. You know, a whole world exists outside the Wall Street universe of China and USA. More to the equation than the US & China economy. A lot more.
Factory Orders Rise Less Than Expected Thursday January 4, 2:23 pm ET By Martin Crutsinger, AP Economics Writer Orders to U.S. Factories Post Smaller-Than-Expected Rebound WASHINGTON (AP) -- Orders to U.S. factories posted a smaller-than-expected increase in November as demand for autos, machinery and steel all posted declines, reflecting the slowdown that has hit the manufacturing sector. The writing is on the wall. The steel run is done. Most of the X run up was the result of some completely unfounded speculation of a Chinese buyer. Total bullshit! Inventories are up, production is down, demand continues to fall, mills are idleing blast furnaces. How much more do you need to see?
Steel is no longer controlled by normal forces of supply and demand. It is controlled by commodity traders. I've been in the steel business 33 years and I don't have a clue what is in store for us in 2007. In my 33 years there has never been a strong 3 year period like we have had during the past three years. There has never been a 3 year decline like we had from 2000-2003. We are in unchartered waters.