Ore, Scrap, Black Sea Pig Iron andRebar were down 1-2% across the board last week.  HRC futures rallied, but the indexes movedlower.  Energy prices continued lower,while equities and the Baltic dry index saw strength.

Last week, CRU printed: US $642 -5,Germany $499 +2, Italy $486 +3, China $465 flat (all in short ton).  Differentials still remain extremely elevatedranging from $88 – $195 with Chinese CRC at -$200.  TSI daily prices did the following WOW: USHRC prices 648 -8, NE HRC €423 +1 ($489.59/st +6.2), ASEAN 501 +4($454.41 /st +3.6)and Turkish Scrap 334 -8. 

Platt’s has HRC at 642 -6, whileFlacksteel.com has HRC down $10 to 630.

Iron ore was quiet last week. TheIODEX dropped $1 to 80 while the 3 month ore futures were almost unchanged,down 0.32% to 79.82.   

Steel stocks continued to rally offrecent lows last week as better than expected earnings from SDI and a flurry ofanalyst upgrades kept the market bid. Pricesdid the following: X up 9.78% to $36.92, MT 4.35% to $12.94, AKS 13.02% to$7.12, NUE 5.77% to $52.79 and STLD 5.94% to $22.31.  Iron ore miners were flat ex CLF with VALE up2.01% to $11.16, BHP +0.17% to $59.14, RIO -1.78% to $49.04 and CLF 10.18% to $9.63.   

Zinc was up .47% to 2255.  Gold was down .58% to 1231.8 and silver was up0.86% to 17.182.

Crude oil settled down 2% to 81.01while natural gas was also down 3.8% at 3.62.

Currencies:  The dollar index was up .73% to 85.732. Theyen (-1.2% to 108.16) and Euro (-.71% to 1.2671) were down while emergingmarket currencies were mostly up except for the ruble (-2.86% 41.8085) and real(-1.58% to 2.4739).

The sharp move in the dollar over thepast in the last 90 days has led to currency differentials ranging from $20 toas much as $84 wrt HRC prices.  Brazilcurrently has the largest advantage. See Currency tab for one and three monthchanges.

With the stock market rallying, theVIX plummeted back to the 16% level and demand for safe haven assetsdissipated. Ten year rates rallied in the US (3.41% to 2.27%), Germany (3.84% to 0.89%), Spain (0.5% to 2.17%) and Italy (.76% to2.52%) .  Chinese short term rates decreased 1% to 2.95%.

Economic Releases

Not much economic data was released lastweek.  Existing home sales of 5.17mannualized was up from previous month and beat expectations, however, new homesales of 4.67m annualized was down from the previous months and belowexpectations.

The CPI increased by .1% mom, belowexpectations of 0.2% increase.

HSBC released their October flashmanufacturing PMI report at 50.4 up from the final Sept. reading of 50.2 andbeating expecations.

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

Upside Risks:

        NEW – Russianduties effectively eliminating Russian HRC imports
        Price Hike
        Sharp drop inimport data
        Trade Case Rumors
        Unplanned outages
        Continuedimproved demand
        Infrastructurebill/long-term solution to highway spending bill

Downside Risks:

        Dollar Strength
        Continued weakiron ore and global finished steel prices
        Weak ore leadingto weak scrap and pig iron prices
        Year-endinventory destocking
        High productionlevels
        Import tons
        Economicdownturn, especially in China or Europe reverberating to U.S.A.
        Weak demand inhousing or automotive