Must-read: Global factors drag down US steel plays (Part 14 of 15)
Key European Union indicators
Let’s now analyze the key European Union indicators investors should watch. We’ll first analyze the housing permits in the European Union (or EU). The index tracks the number of permits that have been issued for new construction, additions to existing structures, and major renovations. It can give investors an idea of the housing and construction industry in the EU.
Housing permits increase
The above chart shows the trends in the Housing Permit Index. The index reached 85.4 in the latest reading in August. This represents a year-over-year growth of ~10%. Higher housing permits mean the construction sector will get a boost. This will benefit the steel industry in the EU. ArcelorMittal (MT) is the largest steel company in the EU. U.S. Steel Corporation (X) also gets part of its revenues from Europe.
Sales of passenger vehicles and light trucks are also up ~3.8% in October. Looking at the first ten months of the current year, vehicle sales are up 1.5% year-over-year.
EU another victim of imports
Steel demand is expected to grow by 4% in the current year. Steel production, on the other hand, is up by only 2.4% year to date. Like the United States, the EU is also a victim of steel imports. Finished steel imports in the EU have risen by 22% in the first three quarters of the current year.
A similar trend is visible in the United States where steel production has not kept pace with steel demand . Steel imports as a percentage of apparent steel consumption have reached historical highs in recent months.
This has negatively impacted steel companies such as Steel Dynamics (STLD) and Nucor (NUE). Currently, both of these companies form part of the SPDR S&P Metals and Mining ETF (XME).
In our next part, we’ll look at key trends in the Indian steel industry.
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