The steel sector index has been moving sluggishly recently despite the improving Chinese blast furnace spread, which moves in line with stock prices. This is largely due to doubts over whether the Chinese blast furnace spread can widen further in 2018. However, given the conditions that surround the steel sector in 2018, we have a positive view toward steel shares. The blast furnace spread is improving as the price of iron ore falls and steelmakers continue to gain more pricing power thanks to ongoing industry consolidations in China. In terms of demand, oil-producing countries’ steel demand is picking up on the back of oil price hikes and Chinese steel demand should also continue to grow thanks to the country’s infrastructure investments. Given the ongoing Chinese steel sector consolidations and a rise in iron ore supply globally, China’s blast furnace spread, which moves in line with steel share prices, should improve further in 2018 as raw material prices decline. Higher oil prices are expected to boost oil producers’ steel demand by about 5% in 2018. Soaring steel demand from these countries will have more impact on global steel supply-demand balance ...