Steel ETF: Growth Means Building and Buildings Require Steel
As far as basic materials go, steel is one of the more important ones. We see steel everywhere we go and continued growth in countries like China and India will likely result in steady and possibly increasing demand for steel. That sort of argument is prompting investors to look for ways to tap in to the steel market.
Enter a little known Steel ETF (SLX) from Van Eck Market Vectors. It's not a true commodities exchange traded fund in the sense that it doesn't deal with steel directly, but rather invests in 36 US-listed companies whose primary business is that of steel. Up 39% year-to-date, according to Tom Lydon, and with an expense ration of just .55%, it is certainly making an impressive showing.
Back in February, Richard Kang took a broader look at materials and commodity ETFs and how steel relates to them. His analysis is great and worth the read even though the numbers have certainly changed since the time of it's writing. His conclusion about steel resonates with me and he too cites that the steel ETF isn't a pure commodity play although it is probably the best one available to individual investors at this time:
“There are a lot of products that appear to be covering the same space. But in fact, the overlap is not as great as one might think. If you want exposure to steel in its purest form, it's got to be SLX — though you're getting exposure to an index of companies in the steel industry. For exposure to other industrial base metals (though in this case the exposure is directly to certain commodities markets), there is the PowerShares DB Base Metals Fund (DBB) as well as a similar fund from ETF Securities. For even broader exposure, and back to a basket of underlying stocks, there's XME, IYM, MXI and VAW.”