The absence of a dedicated iron ore ETF has caused
commodity-oriented traders some consternation when iron prices are
soaring, and relief in the opposite scenario. But those looking for
a way to trade the iron mining industry have a few more
[caption id="attachment_58837" align="alignright" width="300"
caption="Substation 138 kV and blast furnace at ThyssenKrupp CSA
steel mill, a JV between Vale and ThyssenKrupp"]
Even though the Market Vectors Steel ETF (
) nominally focuses on steel producers, it has still managed to
accumulate a 23% allocation to Rio Tinto (
) and Vale (
), with both stocks getting roughly an equal weight in the
This "iron and steel" approach seems intuitive and has
definitely helped SLX manage its performance in periods when
rising ore prices
have sapped steel mills' profit margins.
Traders solely interested in steel may balk at having close to a
quarter of their dedicated fund devoted to companies that prosper
at the expense of iron consumers like Posco (
) or ArcelorMittal (
), but that's a story for another day.
Those with absolutely no interest in the steel industry, on the
other hand, will paradoxically get less iron than steel via the
EGShares Emerging Markets Mining and Metals fund (
), which offers 10.5% of its weight to VALE but has a mandate that
prevents it from investing in Australian miners like RIO or BHP
Ironically, EMT is rich with gold, copper and even nickel, but
more of its money is devoted to steel -- companies like Gerdau (
), CSN (
) and Tata Steel -- than VALE.
Until an ETF company comes out with a dedicated iron ore
portfolio that trades the physical commodity price, traders with
iron on the brain may be best served by simply building a personal
"fund" for themselves out of VALE, BHP and RIO.
It might not be glamorous or sophisticated to trade a
three-stock basket, but it's likely that any ultra-specialized iron
mining portfolio you could buy would be so overweight these three
stocks that the results will be the same.