Last week the U.S. dollar strengthenedas the stock market made record highs. AK Steel announced a price increase in the face of plummeting scrapprices and iron ore hovering around 80. 

US Steel and ArcelorMittal followedAK’s lead with price increases of their own. While European HRC prices had been stabilizing prior to this week, thecurrency effect of the short-term depreciation of the Euro currency vs. the USdollar is providing almost $50 in profit. Import licenses indicate October willbe another strong month for imported steel. On Friday, a strong Chicago PMI was announced at 66.2 vs expectations of60 and the previous month’s print of 60.5. 

Last week, CRU printed: US $640 -2,Germany $487 -12, Italy $483 -3, China $460 -5 (all in short ton).  Differentials still remain extremely elevatedranging from $85 – $198 with Chinese CRC at -$193.  TSI daily prices did the following WOW: USHRC prices 642 -6, NE HRC €420 -3 ($476.44/st -13), ASEAN 500 -1 ($453.50 /st -1)and Turkish Scrap 323 -11. 

Platt’s has HRC at 640 -2, whileFlacksteel.com has HRC flat at 630.  

Iron ore was quiet again last week. TheIODEX dropped $1 to 79 while the 3 month ore futures also dropped $1 to 78.84.

Scrap got hit across the board withEast Coast Shred down the most, 5.63% or $20, to $335.  Rebar in Europe and Turkey also gave upground. 

Steel stocks continued to rally offrecent lows last week as the S&P 500 lifted all boats.  US Steel announced a better than expectedloss.   AK Steel reports this week.  Prices did the following: X up 8.45% to $40.04,MT 1.7% to $13.16, AKS +6.32% to $7.57, NUE 2.41% to $54.06 and STLD 3.14% to $23.01. Iron ore miners were mixed.  Vale dropped 9.59% to 10.09 perhaps affectedby the outcome of Brazil’s presidential election. BHP was up .5% to $59.44while RIO -2.18% to $47.97.  CLF continuedto rally up 16.61% to $11.23.   

Zinc was up 2.46% to 2310.5.  Gold was down 4.89% to 1171.6 and silver was dropped6.26% to 16.10.  These are the lowestprices for Gold and Silver since 2010.

Crude oil settled down .58% to 80,while natural gas was up 6.9% at 3.873.

Currencies:  The dollar index was up .73% to 86.92. Theyen (-4.38% to 112.9) and Euro (-1.29% to 1.25.07) were down while emergingmarket currencies were mostly flat except for the ruble (-2.87% to 43.009).

Economic Releases

The Chicago PMI released Friday crushedexpectations as indicated above.  Durablegoods orders were down 1.3%, a big improvement from the previous months drop of18.2% but below expectations of .6% gain.

The ABI index continues to climb as do homeprices up 5.6% in August vs expectations of 5.5%, but down from 6.7% inJuly.  September new home sales were downto 467m annualized from 504m in August and missed expectations.  Sept pending home sales rose .3% vs -1% inAug., also missing expectations of 0.5%.

Consumer confidence was impressive at 94.5from 86 last month and beating expectations of 87.2.

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

Upside Risks:

–        Price Hike – Willit be a catalyst to move prices higher
–        Strongmanufacturing data
–        Mid-termelections
–        Sharp drop inimport data
–        Trade Case Rumors
–        Unplanned outages
–        Continuedimproved demand
–        Infrastructurebill/long-term solution to highway spending bill

Downside Risks:

–        Another recordmonth of imports
–        Increasedinventories at service centers
–        Failed Price Hike  prices
–        Dollar Strength
–        Continued weakiron ore and global finished steel prices
–        Weak ore leadingto weak scrap and pig iron prices
–        Year-endinventory destocking
–        High productionlevels
–        Economicdownturn, especially in China or Europe reverberating to U.S.A.
–        Weak demand inhousing or automotive
–        Ebola