The Bluescope Steel Limited (ASX: BSL) share price edged lower today to finish trading in the red at $20.03 apiece.
That marks a 5% down-step in the steel producer’s shares in the past week, despite there being no price-sensitive information for the company in that time.
So what’s happened? Let’s investigate to find out.
Why is the Bluescope Steel share price dropped 5% in a week?
In the absence of any market-sensitive information, we have to look to Bluescope’s underlying commodity markets to understand what’s driving the bolus of its price action lately.
Bluescope derives the bulk of its revenue from domestic and international steel sales. The price of steel has been on a strong rally these past 12 months, having climbed 53%.
However, it has been volatile these past few months, and after regaining some ground in the period of August to October, the price of steel has once again consolidated to the downside.
Steel peaked on 8 October at US$923/tonne and has since made a sharp downturn, now trading 6% lower at US$870/tonne.
Bluescope is an ASX resource share that produces a commodity, meaning its share price has a unique relationship to fluctuations in the price of the commodity it sells – in this case, steel.
That’s because it is considered a price taker, and must accept the pricing levels of the markets it sells into, which are often determined by the unseen forces of supply and demand, amongst others.
Alas, due to this relationship, the Bluescope Steel share price will fluctuate as the price of steel – and other related industries such as construction – fluctuate as well.
With this relationship in mind, and given the recent pullback in steel pricing since the start of October, it starts to build the picture as to what might be fuelling the Bluescope steel share price lately.
Bluescope Steel share price snapshot
The Bluescope Steel share price has had a difficult year to date, however, has posted a return of around 15% since January 1.
It has rallied 36% in the last year, well ahead of the S&P/ASX 200 index (ASX: XJO)’s return of around 19% in that time.