After observing a solid rally through 2021 on account of rising steel and iron ore prices, ArcelorMittal stock (NYSE: MT), the largest steel producer in Europe, is witnessing a correction, declining by 30% over the last month (about 21 trading days) and by close to 6% over the last week (five trading days). The sell-off comes as multiple factors appear to cloud the outlook for the steel industry. With the Russian invasion of Ukraine now into its fifth month, high energy prices and supply chain issues are weighing on consumers in Europe, which is ArcelorMittal’s single largest market (about 53% of sales in 2021). In Q1 2022 filings, the company revised its steel consumption outlook for Europe downward due to these concerns. Moreover, the U.S. Federal Reserve and other major central banks have also been hiking interest rates at a more aggressive pace to combat surging inflation. This could hurt global growth and, in turn, impact steel demand from key consumers including the automotive and construction industry – putting a dent in discretionary spending. Separately, the Covid-19 lockdowns in China – the world’s largest steel consumer – have also been taking a toll on the industry.
However, now that MT stock has seen a decline of about 30% over the last month, will it continue its downward trajectory in the near term, or is a rally imminent? Going by historical performance, there is a strong chance of a rise in MT stock over the next month. Out of 28 instances in the last ten years that MT stock saw a twenty-one-day decline of 30% or more, 26 of them resulted in MT stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 26 out of 28, or an over 90% chance of a rise in MT stock over the coming month, implying a positive near-term outlook for the stock. See our analysis on ArcelorMittal Stock Chance of A Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last ten years data
- After moving -6% or more over five days, the stock rose in the next five days on 50% of the occasions.
- After moving -12% or more over ten days, the stock rose in the next ten days on 56% of the occasions
- After moving -30% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 93% of the occasions.
This pattern suggests that MT stock is likely to see gains in the near term.
|S&P 500 Return||1%||-20%||71%|
|Trefis Multi-Strategy Portfolio||3%||-25%||200%|
 Month-to-date and year-to-date as of 7/2/2022
 Cumulative total returns since the end of 2016