Analysts with UBS reported "Last week mills announced yet another price hike as Nucor said costs forced benchmark HRC to $800, up vs $520/t ~2 mos ago. We also learned scrap may be running out of steam after a sharp rise into January. This week earnings season is kicked off by Alcoa on Tuesday.

The week that was: U.S. HRC rises to $800 yet scrap seemingly stalls Mills announced yet another price hike as Nucor said costs forced benchmark HRC to $800, up vs $520/t ~2 mos ago. Buyers were paying $700-$710, but we think March creeps to mid $700s. While Jan scrap rose $75/t we hear supply is better and prices likely sideways in Feb. SCHN met our Q1 view but missed consensus and shrs fell sharply, perhaps an omen for Dec steel results? Coal floods add to cost concerns. We downgraded VMC/MLM on GOP moves to limit road spending.

The week ahead: AA launches Q4 earnings, Yahd visit, Steel Buyer Lunch Alcoa launches Q4 earnings season Tues. after the close, with steels 2 wks later. Q4 weakness is likely understood but only AK and RS tend to offer guidance and we see potential disappointment. This can be overshadowed by steel price strength.

With cost push a dominant theme, and demand improving but minimally, we think margins disappoint. Investors tend to focus on steel prices, but unlike typical recoveries, a cost-push driven one can minimize margin upside. While investors seemed to shrug off NUE's mid-qtr disappointing loss guidance, they penalized a light SCHN result. After the group's strong run, patience may begin wearing thin.