Two reasons why steel prices would rise in the long term

Steel remains an unpredictable commodity. Volatility in steel prices has been the norm of the day which is in resonance or shall we say, sync with the volatility in the construction sector.

If the views of Norm Streu, Chief Operating Officer of LMS Reinforcing Steel Group, published in Journal of Commerce, a newspaper in Canada, are anything to go by; steel prices, though exhibiting volatility, would continue to rise:

Reason1: The block-by-block rise of the BRIC (Brazil, Russia, India, and China) countries would continue to chart a growth story that is strong and enviable. Other developing economies in the planet would further add to this buildup.

Since there are no visible dampeners to turn this beautiful story into a nightmare, the investor world can rest assured that steel prices would go up.

Reason 2: US demand in the auto-sector and construction sector is expected to pick up!

Car production can pick-up by 50% in the coming years, thanks to global demand in the automobile sector. The increase in demand rise would positively impact the steel industry as auto sector typically uses about 20 per cent of U.S. production supply. A non-residential construction index--the U.S. Architecture Billings Index—has touched its highest level since 2007 recently.

Certain other indicators support the assessment of a slow but real recovery of US construction sector in 2011.

Playing it out smart—profiting from the long-term rise in the steel prices and effectively negotiating the short-term volatility—would be a distinction for any daring investor.