Commodities like steel (HVH26) are notoriously volatile, as many Barchart readers know. But steel is also viable as a trading asset.
These days, I tend to track it via the VanEck Steel ETF (SLX). This industry tracker is approaching its 20th birthday. You can see the top holdings here, including Nippon Steel (NPSCY), which acquired US Steel, among the 39 stocks in SLX. It is concentrated as so many industry ETFs are, at more than 60% across its top 10 holdings. The fund is not huge, at $200 million. But it has been a potent performer at times.
SLX gives investors and traders a targeted look at the global steel industry by tracking a basket of companies involved in steel production, fabrication, and the mining of iron ore. The narrative for the steel sector is currently dominated by a structural shift toward infrastructure-led demand and the high-capital transition to green steel production.
The bull case for SLX is anchored by a significant rebound in global demand which is expected to grow modestly, by about 1%-3%, in 2026. This growth is being fueled by massive infrastructure projects in the U.S. and India, alongside a stabilization of manufacturing activity in Europe. The industry is also benefiting from a “green premium” of sorts, as environmental regulations drive demand for low-carbon steel produced in electric arc furnaces.
The bear case centers on the persistent weakness in the Chinese real estate sector and the resulting volatility in raw material prices. China remains the world’s largest steel producer and consumer, and its ongoing housing downturn continues to weigh on global iron ore sentiment. While Chinese production is expected to decline by roughly 4.5% in 2026 due to tighter environmental controls, the risk of excess Chinese steel being dumped on global markets remains a primary concern for Western producers.
Additionally, steelmaking remains a highly energy-intensive business. Any sudden spike in energy costs or a disruption in the supply of coking coal, could rapidly erode the profitability of the cyclical firms that dominate this ETF.
This is one stretched ETF price trend. And it does seem priced for a decline. The Percentage Price Oscillator (PPO) just crossed over from a very high level. And without using any fancy technician jargon, perhaps we can agree that when an entire industry doubles in under 12 months’ time as SLX just did, it is “rich” on that measure alone.
