Steel Stumbles A Bit, But Still Leads ETF Set

Helping to push its performance was Posco (NYSE: - ) and Companhia Vale do Rio Doce (NYSE: - ). They both went into Wednesday with IBD Relative Strength Ratings of 96 and 97 respectively. Their IBD Composite Ratings are 84 and 98.

Both stocks showed strong year-to-date returns. Posco has risen from 82.67 to 138.56, or 77.76%. CVRD is up from 29.74 to 45.04, or 58.68%. Posco makes up 6.45% of the ETF, while CVRD is 14.54%.

South Korea's Posco is Asia's third-biggest steel producer. It posted a 55% increase in profits in the second quarter, as demand surged from shipbuilders and auto companies, especially ones in China and India.

Income Up

Net income rose to $1.2 billion in April-June, the highest in eight quarters, from $759 million a year ago. Posco rose to 151.94 on July 25, a new high for the year. It dipped to 129.88 on Aug. 17, when the rest of the markets fell, and was below its 50-day moving average. But it recovered and is again approaching its high.

CVRD, a Brazilian steel producer, is also taking advantage of Chinese and Indian demand. The company's shares have risen steadily for a year, and its earnings have been growing for 12 out of 13 quarters. Growth has been in triple digits in the last two quarters.

The stock also dipped in the last few weeks, from its high of 53.10 on July 23 to 38.21 on Aug. 16. But it has recovered to 47.50 since then.

AK Steel (NYSE: - ) makes up much less of the ETF -- 1.77%. But it's the best year-to-date performer in the fund, at 113.31%. It's Relative Strength Rating is 98, and its IBD Composite Rating is 94.

Volatility

AK Steel hit a high July 25 at 41.55, then plunged to 29.77. It recovered to 36.05 on Tuesday. Earnings rose 270% in the second quarter and 700% in the quarter before that.

Sales have also been a bright spot. In the quarter that ended in March 2006, sales went up only 1%. But since then, growth has accelerated every quarter. In the second quarter, the company reported a 25% gain.

Moody's upgraded the company to Ba3 from B1, citing AK Steel's efforts to reduce debt.

ArcelorMittal (NYSE: - ), 14.4% of the ETF, was another strong performer. It has a dominant position in all of the markets in which it operates. The stock has posted a 50.38% return year to date and has shown both consistent sales growth and earnings growth for a year.

The stock's Relative Strength Rating is 94, and its Composite Rating is 96.

Steel demand has been boosted over the last several years by demand from the developing world, especially China and India.