HRC Futures

The front end of the US HRC futurescurves saw an $11 drop to $594 for Q1. The HRC Midwest CRU actually rallied $6 to $597 on low volumes to thebewilderment of most in the industry.  CRUprinted HRC at: US $597 +$6, Germany $443 -$16, Italy $424 -$8 and China $445-$4(all in short ton).  CRU printed US CRCat $733 -$2 and HDG at $799 +$6. TSI daily prices did the following WOW: US HRCprices $598 -$5, NE HRC €400 -€5 ($430/st -$11), ASEAN $462 -$6 ($419/st -$5.4)and Turkish Scrap $320 +$1.  Platt’s hasHRC down $10 to $595, CRC also -$10 to $725 and HDG down $20 to $800. has HRC down $15 to$580.  Flack Steel Global Weighted Index lost$1 to $453/st.  Except for Brazil andIndia, the CRU has every other country between $147 and $186 above the USMidwest price.

AISI weekly production reboundedstrongly to 77.2% and 1.857m tons from the prior week.  January flat rolled import license data istrending toward 1.37m short tons while the unofficial cumulative 2014 flatrolled import is 14.6m st.

The dollar index rallied another 1% to91.94 with the Euro off 1.28% to 1.1842, the British pound down 1% to 1.5174, theruble down 5.6% to 62.04.  The IndianRupee railed 1.53% to 62.325, the Brazilian real increased by 2.28% to 2.63,the Turkish lira was up 2.15% to 2.29, the Australian dollar rallied 1.43% to.8205 and the Japanese Yen saw a 1.73% rise to 118.42.

The S&P 500 fell 0.54% to 2035 whilethe VIX was flat at 17.55. All of the steel mills were down as flat rolled andoil prices continued to fall.  US Steel -$2.02to $24.57, AK Steel -$0.57 to $5.40, STLD -$1.00 to $18.90, NUE -$1.23 to$47.78 and MT -$0.49 to $10.35.

Iron ore gave back some of the prior week’sgains as the IODEX shed $1.25 to 70.5 and March ore futures fell $0.60 to$69.15. Iron ore miners were mixed.  BHPand RIO were down 1.28% and 0.42% to $46.93 and $45.53, respectively. CLFgained 1.71% to $7.15 while VALE gained 7.68% to $8.55.

Coking coal dropped $1.90 to$108.10.  HMS Rotterdam was down 4% to$291 and Busheling shed $5 to $367.5. Chinese and NW European rebar prices weredown 3% and 1%, respectively, while Chinese rebar futures dropped $4.4 to $4.14.Rotterdam HMS moved up $10 to $304 and Busheling increased by $7.50 to $372.50. HRC prices fell in Shanghai and Antwerp.

Unemploymentdata was better than expected on the rate front with 252k new jobs producing a5.6% unemployment rate, beating expectations of 5.7%. Wage growth disappointed.Construction put in place for November grew to $975 billion from $971b inOctober.  November factory orders slippedmore than expected as did the December ISM services index, which fell to 56.2from 58.5.

For the week, zinc fell 49.5 to $2146/mt. Copper slipped 2.24% to 275.45/pnd. Goldralied 2.5% to 1216 and silver was up 4% to 16.42.

Crude oil continued its epic slidedown another 8% to 48.36.  Natural gas fell1.9% to $2.95/mbtu.  The average U.S. gasprice pushed lower again to $2.14/ gallon.   

U.S. andGerman ten year rates moved lower as investors continued to seek safe haven. TheU.S. 10 year interest rate was down 7.85% to 1.94% and the German ten year yield dropped by 1.2% to 0.49%. The Spanish ten year yield rallied 15% to 1.72% and the Italian ten year yield was up % to 1.74%. The Japanese ten year yield was .33%.

I currently have the following upside anddownside risk for HRC prices:

Upside Risks:

        Trade casefilings
        Supply sidedisruptions
        Strongmanufacturing data
        Rallying scrapprices
        Sharp drop inimport data
        Infrastructurebill/long-term solution to highway spending bill
        Sharp upturn innonresidential construction

Downside Risks:

        Increasinginventory levels/Q1 destocking
        Relatively warmwinter leading to lower natural gas and scrap prices
        Dollar rally/currencyissues/sovereign default
        Increasing importmarket share
        Falling globalprices leading to decreased import offers
        Continued weakiron ore and global finished steel prices
        Weak scrap and/orpig iron prices
        Crashing oil& energy prices  
        High productionlevels
        Economicdownturn, especially in China or Europe reverberating to U.S.A.
        Weak demand inhousing or automotive