"Please would you be able to provide some clues as to why Arcelor Mittal has not been performing as one would expect ? Despite the very slow progression of lower lows over the last few months I do not see that much price upside visibility as compared to other steel manufacturing companies.

"Always enjoying your great effort in empowering the Collective."

Eoin Treacy's view Thank you for this interesting question and your kind words. While in China over the summer we had the pleasure of going to dinner with some of Mrs. Treacy's old colleagues at ThyssenKrupp who shared some insights on the Chinese steel sector.

They confirmed that overcapacity is a significant obstacle for the Chinese industry. The slowdown in demand from the USA, Europe and Japan due to the credit crisis combined with higher input costs in the form of iron-ore has led to significant margin compression. They also confirmed that efforts to rationalize the Chinese steel sector meet with significant opposition from vested interests in the regions which compounds the problem of over supply.

Arcelor Mittal is not immune from these pressures. It fell back below the 200-day MA from May and continues to range above €20. While it has improved somewhat over the last month, a sustained move above €27 is needed to indicate demand is beginning to reassert dominance. JFE Holdings and United States Steel Corp have comparatively similar charts with well defined ranges over the last few months which they would need to break upwards from to reignite significant bullish interest.

Posco hit a medium-term peak in January, broke below the 200-day MA in May and found support by early June. It failed to sustain the breakout from the short-term range last week and has since pulled back to test the lower side. An upward dynamic is required to question scope for some additional lower to lateral ranging. Nippon Steel continues to drift lower and is testing the 2009 lows. A break of the progression of lower rally highs would be required to question scope for further downside. Both China Steel Corp and Cia Siderurgica Nacional have lost momentum and need to hold above their May lows to main a medium-term bullish outlook. Gerdau failed to sustain the upward break in April, broke below BRL25 in May and reasserted the downtrend last month. A sustained move above BRL 25 is required to question scope for further lower to lateral ranging.

ThyssenKrupp, which has more of a focus on the auto sector and elevators, continues to form a first step above the base and while it is testing the upper side of the range a sustained move above €28 is required to reassert the medium-term uptrend. Allegheny Technologies continues to range, mostly above $40, and would need to break the short-term progression of higher reaction lows to question scope for some further higher to lateral ranging. Evraz Group found support in June and has posted a progression of higher lows since July. A sustained move below $28 would be required to question scope for some additional upside. Tata Steel rallied impressively from the June lows but encountered at least short-term resistance in the region of the April high two weeks ago and needs to sustain a move above INR700 to reassert the medium-term uptrend. Tenaris has rallied to test the 8-month progression of lower highs but needs to sustain a move above €16 to indicate a return to medium-term demand dominance.