The international steel (commodities) market follows a cyclical pattern, where changes in a domestic price are superseded by global shifts in the economic cycle, which in turn affects local currencies and financial markets. By watching the economic cycle we can re-affirm our position on our domestic purchases and sales, and therefore have increased confidence in our trading position.
An acceleration in demand drives prices, regardless of excess or new capacities. In general, 'demand' is difficult to forecast (overcapacity is already there, and new mine supply is well documented). We are looking for drivers of the global steel market, specifically the correlation between price action and major trend indicators of the global economy.
Many key indicators are lagging the market movements, and therefore we look to replace these proven drivers with substitutes (an index proxy, currencies) which offer real-time movements. This helps to show if these underlying movements in the economic indicators are sustainable.
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- Crude Steel Production
- PMI (Purchase Manager's Index)
- Industrial Production / OECD
- US Yields (10-year Yield curve)
- IFO (Business Climate Index)