Why has the Bluescope (ASX:BSL) share price had such a tough time in November?

November hasn’t been the best of months for the steel producer.

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Shares in steel producer Bluescope Steel Limited (ASX: BSL) haven’t produced much excitement in November. The company has been trading sideways in sawtooth fashion for over a month now, failing to breach the $22 a share mark on several occasions.

At the time of writing, The Bluescope share price is trading at $20.45 after spiking less than 1% from the open today.

It’s been a difficult period during the back end of 2021 for the company, amid softer steel prices and weakening demand for steel out of China. As such Bluescope is now down 1% for the month and has slipped over 2% into the red this past week.

What’s up with the Bluescope share price lately?

Bluescope shares have struggled of late while investors respond poorly to volatility in steel spot and futures markets. The price of steel has fallen off the cliff-face since early October, sliding 29% in that time to trade at 4,217 Chinese Yuan per tonne.

This drop comes even as steel prices reached 10-year highs during the last 2 months. Production curbs imposed by China to tackle emissions and pollution put a dent in the demand and supply dynamic for the metal in 2021, alongside steelmakers’ profits this year.

Now as Steel futures trade at their lowest levels since February 2020, China is again set to resume production – but domestic demand for the metal is still weak, according to Trading Economics.

Coming off such a buoyant steel market where the metal now trades almost 30% lower in 2 months, bodes in poorly for the Bluescope share price given that it produces the commodity.

As such, it is considered a price taker that share prices fluctuate with volatility in the wider commodity markets, especially steel and iron ore.

Without the frothy steel prices to drive cash flow down into Bluescope’s bottom line, the company’s earnings are under threat and investors are responding accordingly by staying on the sidelines for now, Morgan Stanley suggests. The broker is neutral on Bluescope and values the company at $23.50 per share.

Investors are also tightening their grip on ASX-listed names touted as heavy polluters and are calling for more climate representatives on the boards of Australian resource companies.

For instance, a report from the Investor Group of Climate Change (IGCC) recently called out 15 ASX 200 companies – including Bluescope – and submitted that each lacks the skills and experience to tackle climate risk.

This, the IGCC says, poses a material risk to the company and investors alike, and it calls on companies like Bluescope to be the beacon of change by recognising and tackling the issues.

It’s not all doom and gloom for Bluescope investors, however. Almost 60% of the analysts covering the company have it as a buy, and the average price target is $25.18, implying an upside potential of 24%.

Bluescope share price snapshot

In the past 12 months, the Bluescope share price has climbed 19% after rallying a further 16% this year to date.

These results are well ahead of the benchmark S&P/ASX 200 Index (ASX: XJO)’s gain of around 10% in the last year.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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