Dollar rally continues to pressurecommodities and commodity related stocks.

Last week, CRU printed: US $656 -5,Germany $493 -5, Italy $484 -9, China $457 -1 (all in short ton).  Differentials still remain extremely elevatedranging from $91 – $219 with Chinese CRC at -209.  TSI daily prices did the following WOW: USHRC prices 656 -4, NE HRC €421 -5 ($478/st -12), ASEAN 500 -4 ($453.5 /st-3.60) and Turkish Scrap 345 -15. 

Platt’s has HRC at 655 -5, has HRC down 10 to 650.

For the week, the IODEX and 3 month ironore futures were flat at 79.50 and 79, respectively.  China was closed starting Wednesday for anational holiday.  Inventories were notreported.

Steel Stocks were hit hard last week.  Prices did the following: X -12.43% to $36.34,MT -9.16% to $12.69, AKS -10.21% to $7.65, NUE -5.88% to $51.98 and STLD -5.08%to $21.63.  Iron ore miners were alsolower with VALE -1.52% to $11.02, BHP -4.35% to $57.23, RIO -6.54% to $47.17 andCLF -23.95% to $8.32.   

Zinc was flatish at 2258.5.  Gold was down 1.85% to 1192.9 and silver was down4.05% to 16.83.

Crude oil slid 4.06% to 89.74 whilenatural gas was relatively unchanged at 4.039.

Currencies:  The dollar index continued to gain up 1.23%to 86.69. The yen (-.43% to 109.76) and Euro (-1.32% to 1.2516) weakened whileemerging market currencies got hit across the board again with Brazil (1.58% to2.4584), Australia (-1.03% to 0.8675), Russia (-1.96% to 39.9381), Turkey(-1.46% to 2.295), Mexico (-1.79% to .8765) and Canada (-0.79% to 0.8893) allfell against the dollar.

The sharp move in the dollar has ledto currency differentials ranging from $20 to as much as $90.  See Currency tab for one and three monthchanges.

Flight to safety led to lower ratesfor 10 years in the US (-3.7% to 2.43%),Germany (-4.84% to 0.93%), Spain (-4.28%2.1%) and Italy (-3.27% to 2.31%). Chinese short term shed 3.74% to 3.08%as the PBOC continues to drop rates to stimulate their economy.  (actual rates in bold)

Last week global PMI data wasreleased.  In the US, the manufacturingPMI of 56.6 missed expectations of 58.5 slipping from August’s very highreading of 59.  56.6 is still a verystrong reading for this index.  The JPMorgan Global PMI slipped to 52.2 from 54.6. China was flat MOM at 51.1 for the official and 50.2 for the HSBC PMI,with the HSBC missing expectations. The Eurozone PMI held the line at 50.3,down from 50.7 in August.  PMI indexes inBrazil, Germany, France, Australia  SouthKorea were below 50, while Mexico’s PMI increased marginally to 52.6 from 52.1.

The Chicago PMI dropped to 60.5 from64.3 and missed expectations of 61.5.  Factory orders were down 10.1% in August, worse than the expected dropof 9.3%.  The drop was mostly explainedas a result of retooling in auto plants.

Housing data continued to disappointwith construction spending down 0.8%, home prices up 6.7% and pending homesales down 1%, all missing expectations. Construction put in place was down 7.8 million to $961m annualized.  Residential was up 7.5% YOY whilenon-residential was up 6.4%.  Taking acloser look at private construction only, residential was up 8% whilenon-residential was up 11.6%. 

The US ISM Services index dropped to58.6 from 59.6 and missed expectations of 58.9.

One bright spot was the employmentdata with nonfarm payrolls increasing by 248,000 vs. expectations of 210k andupward revisions for August and July. The unemployment rate dropped below 6% to 5.9%. The average workweek in manufacturingstays flat at 40.9 hours, but overtime hours increased to 3.5 from 3.4.

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

Upside Risks:

        Price Hike
        Sharp drop inimport data
        Trade Case Rumors
        Unplanned outages
        Continued improveddemand
        Infrastructurebill/long-term solution to highway spending bill

Downside Risks:

        Dollar Strength
        Continued weak iron ore and global finishedsteel prices
        Weak ore leading to weak scrap and pig ironprices
        Year-end inventory destocking
        High productionlevels
        Import tons
        Economicdownturn, especially in China or Europe reverberating to U.S.A.
        Weak demand inhousing or automotive