-Lead times continued to firm last week and many mills are either booked or virtually booked for January.  The high cost integrated mills are under extraordinary pressure to get the price up toward $700 or above that in order to break even.  Fourth quarter losses at these mills will be large and in at least one case, will wipe out any profit for the year.  However, spot ore pricing is considerably lower than it was last year and although it has bounced off of unsustainably low numbers – it implies a band price of $560-580.  So, likely, some input cost relief is on the way this coming quarter.

-Prices around the world are NOT following the direction in the USA, in fact they are diverging.  China and Northern Europe continue to be soft.   China has a construction bubble overhang after the world’s largest ever hard money (public works – housing) stimulus package has come to an end.  Real estate prices are falling (keep in mind that China’s steel economy, unlike that of Europe and the USA is heavily biased to construction). 

-Scrap is tight in the USA.  Mills are generally short on scrap and are buying what they can to support their robust order books.  Scrap is likely to rise by $20-$40.  If you bake this into the mini-mill cost number – you are just north of $600.

-The price may well jump to the mid-high $700’s which would likely setup the market for a hard re-adjustment in March/April.