Commodity markets saw a similar dynamic playout in steel markets from 2006 to 2008. While there are disadvantages to aging, experience isn’t one of them. I engaged this move in real time pre- and post-GFC. See a chart with AK Steel or US steel and compare it to the Baltic Dry index in that period. There is a reason for those near-coincident peaks. Marginal costs for U.S. steel are generally set by the ~25%-30% of consumption that is imported. Steel shares were amazing shorts once shipping costs collapsed, and, so far, have been again…with a different lag this round. It wasn’t just the GFC; steel producer valuations remained depressed for the next ~15 years, only to soar again on the narrowed competitive geography of the pandemic.
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