A balancing act that took place exactly 50 years ago has much to teach investors. Philippe Petit, a 24-year-old circus performer from France, snuck into New York’s World Trade Centre on Aug 7, 1974. He walked across the Twin Towers on a 200ft steel wire.
Petit is not a household name today but his fresh face was on every paper in the summer of 1974. President Richard Nixon resigned the day after the walk. His resignation was not because of Petit’s antics. The walk even overshadowed Tricky Dicky’s exit.
The walk took six years to plan. Petit did not spare a single detail. He practised for hours on end. He even did a dry run on the Eiffel Tower and the Sydney Opera House. His collaborators included his girlfriend and a photographer. The crew even hired a helicopter to check out the top of the 417m building (more than twice the height of UOB Plaza). The height was not the only danger. The wind could have blown him off course.
The walk was a success and a spectacle. He even danced on the wire as a throng gathered to cheer him. He was arrested for trespassing, but the police secretly admired him.
Petit’s choice of a steel wire was a ringing endorsement of the metal. Steel is sturdier than copper and aluminium. Steel is the bedrock of buildings and factories.
Steel’s recyclability is as vital as its strength. Irrespective of the grade of steel, it is recyclable. New steel products, like those used in water pumps, contain recycled steel.
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Steel is also a magnetic material and scrap steel can be easily recovered from garbage dumps and lakes.
The Twin Towers were destroyed in the 9/11 terrorist attack. But steel is still the most frequently used metal. Over 2 trillion tonnes of crude steel were produced in 2023. This is 18 times the steel production in 1973.
Luckily for Petit, his adventure overlapped with a collapse in steel prices. There was a glut of steel in 1973–75. The recession crippled steel demand in the West. Many steel factories were driven out of business.
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Petit’s wire cost US$220 in 1974. That amounts to US$1,461 ($1,905) in today’s money. If one were to pull a similar stunt across the towers of UOB Plaza today, it would be a lot more expensive today. It would cost about US$3,000 for the same 200ft wire in today’s terms.
The last decade has seen low investment in steel capacity. Steel production growth has averaged 2% in the last decade. This is half the level in the preceding decade. That’s because China’s steel factories such as Baowu Steel Group (BaoSteel) had cut supply. The pandemic worsened the shortage and many factories shut with the lockdown.
This has created a perfect storm as steel-hungry industries are reviving after Covid. However, iron ore and coal, the two main ingredients for steel, are hard to source.
The main growing source of demand for steel today is India. India has replaced China as a rapidly growing Asian giant. Steel demand could rise by 3%–4% over the next five years, according to the World Steel Association. The production growth may not match that amount. India’s demand could grow at 8% in 2024 and 2025. India is building bridges and factories at a similar clip to China in the 2010s.
India has plans to build more airports, bridges and ports. India’s infrastructure size could rise by 52% over the next five years to US$324 billion. This is five times the level in 2014.
Steel is essential to these endeavours. India’s new appetite for steel now means that it has become a net importer.
Investors need not court danger by walking on a steel wire. There are other ways to enjoy its benefits. Steel giants like ArcelorMittal, listed in the Netherlands, are trading at just four times FY2025 EV/Ebitda. This is half its valuation in the previous steel boom in 2007. More than a quarter of the steel mills in Asia are trading at below book value.
Steel prices could rise further as the short supply is hard erase. China BaoSteel is trading at half its 2021 peak. Playing the stock market could be safer than walking across a skyscraper.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era.
