POSCO (PKX) Plunges 6% Amid Steel Sector Turbulence: What’s Fueling the Selloff?

Summary
• POSCO (PKX) trades at $55.57, down 5.86% from $59.03
• Intraday range: $55.31 (low) to $56.32 (high)
• Analysts project $69.46 average target, 25.6% upside
• Steel sector peers like Nucor (NUE) also under pressure, down 1.58%

POSCO’s sharp selloff has drawn attention as the steel sector faces crosscurrents from global trade dynamics and production shifts. With the stock hitting a 52-week low of $39.40 and analysts maintaining a bullish average rating, the move raises questions about short-term volatility versus long-term fundamentals. The broader steel industry is navigating supply chain adjustments and regulatory scrutiny, compounding near-term uncertainty for PKX.

Steel Sector Volatility and Trade Policy Uncertainty
POSCO’s 6.31% decline reflects broader steel sector fragility amid evolving trade policies and production overcapacity concerns. Recent news highlights China’s export controls on 300 steel products and OECD warnings about global overcapacity reaching 721 million metric tons by 2027. Additionally, U.S. steelmakers like U.S. Steel and Cleveland-Cliffs credited Section 232 tariffs with reducing import penetration to 16%, but industry leaders warn of potential loopholes in USMCA. POSCO’s exposure to international markets and its dynamic PE ratio of 21.46 suggest investors are recalibrating valuations amid regulatory and supply-side risks.

Steel Sector Mixed as NUE Leads Downside
The steel sector is under pressure, with Nucor (NUE) down 1.58% and Cleveland-Cliffs (CLF) down 2.18%. POSCO’s 5.86% drop outpaces peers, reflecting its higher sensitivity to global trade dynamics. While U.S. producers benefit from Section 232 tariffs, POSCO’s international operations face headwinds from China’s export restrictions and OECD-forecasted overcapacity. The sector’s average P/E of 4.99 (vs. POSCO’s 21.46) underscores divergent valuations, with investors favoring near-term protectionist policies over long-term growth narratives.

Options and ETF Plays for Steel Sector Volatility
• 200-day MA: $51.13 (below current price)
• RSI: 63.61 (neutral)
• MACD: 1.16 (bullish), Signal: 0.43
• Bollinger Bands: $48.79 (lower) to $59.17 (upper)

POSCO’s technicals suggest a short-term bearish bias despite long-term bullish patterns. Key support levels at $53.84 (30D MA) and $51.13 (200D MA) could trigger further declines. The stock’s 52-week range of $39.40–$61.24 indicates potential for mean reversion if volatility subsides. ETFs like XLB (Steel Select Sector SPDR) could mirror sector moves, though no leveraged ETFs are directly tied to PKX.

Top Options Contracts:
• PKX20260220P55 (Put, $55 strike, Feb 20 expiration):
- IV: 60.30% (high volatility)
- Delta: -0.4377 (moderate sensitivity)
- Theta: -0.0249 (moderate time decay)
- Gamma: 0.0375 (responsive to price swings)
- Turnover: 0 (low liquidity)
- Leverage: 14.43% (moderate)
- Payoff (5% downside): $0.285 (max(0, 55.570.95 - 55))
- Why it stands out: High IV and gamma make this put option attractive for a bearish play, though low turnover may limit execution.

• PKX20260220C55 (Call, $55 strike, Feb 20 expiration):
- IV: 75.35% (very high)
- Delta: 0.5667 (moderate sensitivity)
- Theta: -0.1016 (high time decay)
- Gamma: 0.02999 (moderate responsiveness)
- Turnover: 0 (low liquidity)
- Leverage: 10.04% (moderate)
- Payoff (5% downside): $0 (max(0, 55.570.95 - 55))
- Why it stands out: High IV and leverage make this call option speculative, but theta decay and low turnover pose risks.

Trading Insight: Aggressive bears may consider PKX20260220P55 into a breakdown below $53.84, while bulls should wait for a rebound above $56.32 to re-enter.

Backtest POSCO Stock Performance
The backtest of PKX's performance after a -6% intraday plunge from 2022 to now shows mixed results. While the ETF experienced a maximum return of 1.58% over 30 days, the 3-day and 10-day win rates were lower, at 47.91% and 45.73%, respectively. This suggests that while short-term gains were possible, they were not consistently achieved, and the ETF faced challenges in the immediate aftermath of the intraday plunge.

Steel Sector Volatility: Time to Rebalance or Ride the Wave?
POSCO’s selloff reflects steel sector fragility amid trade policy shifts and global overcapacity. While analysts maintain a bullish average rating, near-term volatility is likely to persist as China’s export controls and OECD forecasts weigh on sentiment. Investors should monitor $53.84 (30D MA) as a critical support level and $56.32 (intraday high) for potential reversals. Nucor (NUE), the sector leader, down 1.58%, offers a barometer for industry sentiment. Act now: Short-term bears may target PKX20260220P55 if $53.84 breaks, while long-term bulls should wait for a confirmed rebound above $56.32.