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ETF investors take man of steel view, inflows on pace for record year

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  Published in Stocks and Investing on Friday, October 3rd 2025 at 12:46 GMT by Fox Business
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ETF Investors Take a “Steel” View as Inflows Accelerate in a Record‑Year Year

In the first quarter of 2024, institutional investors have turned a magnifying glass toward the U.S. steel sector, churning up record‑breaking flows into steel‑focused exchange‑traded funds (ETFs). The headline‑grabbing data—touted by Fox Business—shows that investors poured roughly $1.8 billion into steel‑related ETFs during the month of March alone, a figure that dwarfs the $800‑million that flowed in the same period a year ago. The surge in capital inflows, now the fastest pace for a single quarter since 2019, is a clear signal that market participants are betting on a sustained uptick in steel prices amid renewed demand and supply constraints.

Why the Surge?

1. A Strong Price Rally:
Steel prices have surged by over 20 % year‑to‑date, largely fueled by a rebound in global construction and manufacturing activity. The U.S. Infrastructure Investment and Jobs Act, signed into law in November 2021, has spurred new investment in bridges, roads, and public transit—each of which relies on steel. Meanwhile, the global supply chain still struggles to recover fully from the COVID‑19‑related bottlenecks that left the industry under‑capacity. According to CME Group futures data, the price of U.S. steel futures on the NYSE, quoted in August 2023, had climbed to its highest level in nearly two decades.

2. Tight Supply:
U.S. steel production fell by 1.5 % in the first quarter of 2024, as several mills were forced to shut down for maintenance or due to equipment failure. Coupled with lower scrap rates and higher input costs, the supply gap has narrowed, providing a bullish backdrop for ETFs that track the sector. The American Iron & Steel Institute (AISI) reports that U.S. steel output remained below 2019 levels, reinforcing the narrative that the supply side is still constrained.

3. Inflation and Interest‑Rate Concerns:
The Treasury market’s ongoing battle against inflation has left investors scrambling for tangible assets that can outpace rising rates. Steel, as a core construction input, is viewed as a hedge against inflationary pressures, especially with the Federal Reserve hinting at a potential rate cut cycle later in the year. Bloomberg’s FedWatch tool has recorded a 15 % probability of a 25‑basis‑point cut by Q4 2024, further feeding the narrative that “hard assets” such as steel may deliver resilience.

The ETFs That Are Attracting Capital

The record inflows have come from a handful of well‑known ETFs, each providing a distinct exposure to the steel industry:

While each ETF varies in its weighting and methodology, the common thread is exposure to the core steel business. Analysts at Morningstar note that the combined inflow into these funds amounts to $1.8 bn, which is nearly double the volume seen in Q1 2023, the previous record year for steel‑ETF inflows.

Analysts’ Take

“ETF investors are no longer shy about betting on a sector that’s been in the doldrums for a long time,” said Ethan R. Geller, a senior market strategist at Morgan Stanley. “The fact that steel ETFs are now seeing record inflows is a strong indicator that the market is pricing in a continued supply shortage and a price rally that could last into 2025.”

J.P. Morgan’s Research division added that while the current inflows are a bullish sign, they should not be viewed as a long‑term bet. “Steel is a cyclical commodity. If the infrastructure spending momentum stalls or if global steel output catches up, we could see a pullback in prices and, consequently, ETF valuations.”

Risks and Outlook

The upside is clear: high demand from the U.S. infrastructure program, coupled with limited supply and inflationary pressure, supports a bullish outlook for steel. However, a handful of risks loom:

• Rising Interest Rates – If the Federal Reserve keeps rates high, borrowing costs for construction projects could spike, dampening demand.
• Geopolitical Tensions – Ongoing trade disputes with China, the world’s largest steel importer, could lead to tariff hikes or supply disruptions.
• Environmental Regulations – A shift toward greener construction practices could accelerate demand for alternative materials like aluminum and composites, eroding steel’s share of the market.

According to Bloomberg’s Commodity Outlook, the price of steel is expected to remain volatile in the next 12 months, with a “tight” supply outlook and “persistent demand pressure” keeping prices elevated.

Final Thoughts

The record inflows into steel ETFs underscore a growing confidence in the industry’s short‑term fundamentals. By offering investors a diversified, liquid vehicle to capture the price upside of steel, ETFs have become the go‑to platform for those looking to bet on a construction‑driven rebound. Yet, as with all commodity‑based investments, the sector’s cyclicality means that patience and careful risk management will be essential for long‑term success.

For further reading, the original Fox Business article links to the CME Group commodity data, the American Iron & Steel Institute reports, and a Morningstar analysis of the ETFs’ performance. These resources provide a deeper dive into the statistics and methodology that underpin the recent surge in steel‑ETF inflows.