Chuck Bradford, with the Affiliated Research Group, gave SMU some highlights on the steel market:

Domestic steel production in November 2010 was 7,074,126 net tons, which compared to 7,212,837 in October and 6,295,536 a year ago. Thus the industry operated at 68.3% in November 2010 compared to 67.3% in October and 61.4% a year ago. However, November had less operating days than October. Thus November 2010 output increased by 1.3% compared to October on a daily basis.

Nucor raised its flat rolled prices again last night (Dec. 28) by $30/net ton, to $740

With domestic steel production essentially flat during the last few months, domestic steel deliveries probably were also flat since the mills have been operating with minimal inventories.

However, holidays can significantly impact steel shipments in December as can weather conditions that may make it difficult to ship the product.

Preliminary data from the U.S. Department of Commerce reports steel imports in November were 1.78 million net tons, down 5.5% from October final imports of 1.89 million net tons. This compares to actual imports in November 2009 of 1.4 million net tons.

Both steel scrap and steel mill product prices have soared around the world in recent weeks. As recently as early December, domestic steel leaders were quoted in the trade press as expecting a "choppy" recovery and very slow growth in 2011. In reality, hot rolled coil prices hit a bottom early in November at about $520 a net ton (some reports claim that there were some transactions as low as $500/t) with recent announced price increases at $710-$720 for January delivery.

ArcelorMittal has issued a guarantee at $700 a ton through the end of March. Shredded scrap prices bottomed at $335/GT in early October and reached $430 in early December. We expect another $50 a gross ton price increase in January 2011. The most recent HRC price increases seem to be in anticipation of the next round of increasing scrap costs. The ArcelorMittal move may lead to a squeeze on the mini-mills as scrap moves up in cost.

In recent weeks, a number of economists have increased the growth rates that they expect to be achieved in 2011 to about 3.5%. We believe that this is enough to allow steel consumption to improve, especially in the consumer durable portion of the market, which we believe accounts for 30% of total steel consumption.

We understand that the auto build schedule for the first quarter is up 10%.

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