-USA economic data continues to look incrementally stronger across most industries.  The Euro has broken through the psychological barrier of 1.3:1 but bounced back. European coil prices, after significant reductions in supply, have started to rise.  Scrap remains tight in North America – and it finally started snowing (scrap being more difficult to collect in the northeast). The idling of RG’s Sparrows Point melting and hot mill operations in late December has begun to influence prices in North America.  The timing of RG’s action served to mute and delay the market’s absorption of this sudden reduction to North America’s flat rolled capacity.   The abruptness of RG’s move will likely be a disruptive force in the January marketplace.

-Producing mills won’t be shy about asking top dollar for their dwindling unsecured tonnage. Look for Service Centers to cheer increased prices as inventory bets in November look positively prophetic. NYMEX shorts will be looking to unload positions which should drive that index up this week.  Its time to get as short steel as possible – most other commodities (gold, zinc, natural gas, oil) – have not been rallying.  The broader market, especially with the weakness in Europe and China will not likely support the run in hot roll in the USA.  Time to unload.  

-In spite of that, price hikes by producers should be fully realized this week.  Consumers scrambling to find immediate substitutes for their now AWOL January RG HR tons will help to fill February order books. Very soon we believe that HRC lead times will push past 7 weeks.  We are going to find out exactly just how much steel everyone bought in 4q.  For the immediate term, the RG issue points to a price spike – and with that price spike – a reason to fire that furnace in Sparrows back up.   Prices in the USA are 20% higher than in the rest of the world.  If they get to 30% – then look for a dramatic fall after first quarter.