China’s Demand for Steel (NYSE:X),(NYSE:AKS)

United States Steel Corporation (NYSE:X) and AK Steel Holding Corporation (NYSE:AKS) just may be a big part of the next up and coming bubble.  It is a good time to consider catching the wave and riding it while the bubble blows up instead of deflates.  Bear with me, this will make sense.

It all starts with a man named John Burbank.  He is a the founder of an investment management firm, Passport Capital in San Francisco, and Burbank made a fortune for himself and his investors by betting against the residential real estate market in 2007.  Well, he has a new idea and it might be time to listen.

Jon Markman gives an in-depth discussion of how Burbank's aim is to anticipate what China wants and lock it up ahead of time. Burbank believes the Chinese industrial demand is much hotter than the media would have you believe and that demand for steel is about to skyrocket at a time when inventories are near a multi-decade low.  That makes for a simple equation, High demand + low inventory = Increased prices.  That means the stock price for United States Steel Corporation (NYSE:X) could sky rocket as profits soar under massive demand.

Markman reports, “The thesis goes like this: Investors believe the Chinese government has determined that it over-stimulated its sprawling economy last year with cheap credit and direct outlays, and is now on a path to end the party by upping the amount of funds that banks must keep in reserve. Foreign investors -- believing that the process of tightening credit will diminish the country's industrial prospects or, at the very least, put a squeeze on expansion, consumer demand and corporate earnings -- have thwacked the Chinese stock market on this news.”

Burbank believes the opposite is true: Although Beijing is taking smart, decisive steps to prevent a real-estate bubble by squeezing out excess liquidity, plenty of financial liquidity remains to power the Chinese economy into growth that's every bit as robust as the past few years'.

Read the rest of Markman’s story here and get more of Burbank’s comments.