US HRC prices fell below $600 as CRUprinted HRC at: US $591 -$9, Germany $457 -$1, Italy $432 -$6 and China $449-$5(all in short ton).  CRU printed US CRCat $735 -$3 and HDG at $793 -$12. TSI daily prices did the following WOW: USHRC prices $603 -$4, NE HRC €405 flat ($441/st -$6), ASEAN $468 -$7 ($424.5/st-$6.3) and Turkish Scrap $319 flat. Platt’s has HRC down flat at $605, CRC also flat at $735 and HDG falls$20 to $820. has HRC unchangedat $595. 

HRC Futures Curve

AISI weekly production abruptly fell 102,000tons to 1.746 million tons, while capacity utilization crashed to 72.6% from76.8% (this is for all steel production). Looking back, this is pretty typicalof the last week of the year so we will look at this week’s report to see ifproduction and utilization stays down. 

December flat rolled import licensedata is trending toward 1.28m short tons while the cumulative 2014 flat rolledimport forecast is at 14.68m st.

Flack Steel Global Weighted Index lost$1 to $457/st.  Except for Brazil andIndia, the CRU has every other country/region between $150 and $200 below theUS Midwest price.

The dollar index rallied 1% to 91.08with the Euro off 1.49% to 1.2002, the pound down 1.48% to 1.5328, the Brazilianreal down 1% to 2.6942, the Canadian dollar down 1.34% to 84.84, the Turkishlira down 1.13% to 2.345 and the ruble getting trounced again down 10% to58.75.  The

The S&P 500 fell 1.82% to 2046.3from its record high reached last week. The VIX spiked 22% to 17.79. US Steel was close to flat at $26.59 whileAK Steel managed to gain 0.84% to $5.97. STLD gained 2.68% to 19.9, NUE wasflat at 49.01 and MT was down 3.21% to $10.84.

Iron ore rebounded $5 to 71.75 IODEXand $2.80 to 69.71 for March ore futures. Chinese rebar futures rallied almost$20 to $417. Rotterdam HMS moved up $10 to $304 and Busheling increased by$7.50 to $372.50. Black Sea prices continue to be under pressure with Black Seabillet down $5 to $395 and Black Sea HRC down $9 to $390/st.

U.S. home prices were up 4.5% YOY according to theCase-Shiller 20 City Index and pending home sales were up 0.8%, beatingexpectations of a 0.5% gain.

The ChicagoPMI printed 58.3 missing expectations of 60.8 and was down from November’s 60.8print.  This foreshadowed Friday’sDecember ISM index falling 3.2 point to 55.5 from 58.7 in Nov., missingexpectations of 57.5.  JP Morgan’s globalmanufacturing PMI fell to 51.6 from 51.8. The Eurozone PMI was worse than expected at 50.6, but was up from November’s50.1 print.  France, Italy, Austria andGreece all had PMI’s below 50.  Russia,Indonesia and South Korea also had sub-50 PMIs. China’s HSBC PMI was 49.6 andtheir official PMI was 50.1, both down MOM. Japan’s PMI slipped a touch to 52from 52.1.

Iron ore miners were mixed.  BHP and RIO were basically flat at $47.54 and$45.72, respectively. CLF gained 11% to $7.03 while VALE shed 2.7% to $7.94.    

For the week, zinc gained $47 to $2195.5/mt. Copper was flat at $281.75. Gold fell $9to $1186 and silver dropped 2.35% to $15.768.

Crude oil continued its epic slidedown another 3.73% to $52.69.  Naturalgas was flat at $3/mbtu.  The averageU.S. gas price dropped another 4% to $2.21/ gallon.  Crude and natural gas inventories fell 0.45%and 0.8%, respectively, but crude inventories in Cushing, OK were up.  Distillate and gasoline inventories bothincreased by 1.5%.   

Rates weredown globally last week with the U.S. 10 year interest rate down 6.2% to 2.11%, the German ten year yielddropped by 15% to 0.5%, the Spanishten year was down 13.3% to 1.5% andthe Italian ten year yield fell 12% 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