China, US Hot Rolled Coil Steel Spread Explodes, Cowen Forecasts Short Life Expectancy

The Market Vectors Steel ETF SLX has gained nearly 30 percent thus far in 2016 as China transitions away from investment mode and into consumption mode. The spread of Chinese vs US Hot Rolled Coil (HRC) has swelled above recent highs. The China/US spread now stands around $242 and Europe/HS spread hovers around $170

Related Link: What Is The Deal With US Steel

The spike in Chinese HRC and iron ore is not expected to last long according to Cowen & Co's Anthony Rizzuto Jr.

He says prices are unlikely to remain above average over the longer-term. The on-going efforts to contain the HRC dumping experienced since 2014 may have little impact on price here in the US should the Chinese ship products to another country which then in turn displaces product to the US resulting in increased supply driving prices lower.

Rizzuto Jr. maintains AK Steel AKS, Nucor Corp NUE, AlcelorMittal MT, & US STeel X at Market Perform. He maintains Steel Dynamics STLD and Reliance Steel & Aluminum RS at Outperform.