However, as the aftermath of the Lehman collapse has subsided, steel stocks have been the beneficiaries of many outside factors. Reflationary policies have been enacted in almost every market and fiscal programs of enormous size, specifically in China, have been supportive of the steel industry. In conjunction with the demand boost, steel companies have aggressively cut production to remove the inventory overhang and bottom line costs to stabilize profit margins.
This is a big reason why research firms including Ned Davis Research (NDR) have upgraded the industry to overweight positions. Analysts at NDR studied which stock market groups typically benefit the most when the economy begins to recover from a recession, which they believe is now occurring, and steel stocks were one of the top performers. With cheap valuations, inflation expectations rising, aggressive fiscal policies and perhaps a stabilization of the global economy it is no wonder the stocks have performed so well this year.
