Steel Advance/Decliner Index Jumps.

Our Advance/Decliner Index jumped to 91% from 68% last week, reaching the highest level since June 2008, before the onset of the current global economic rout. While there are fewer price changes in the market in general because of the holidays, the data continue to show broad-based pricing strength led by surging prices in China.

Our China index rose for the fourth straight week, climbing to 100% from 91% last week. This is the third time in the last two months our China index has hit 100%, meaning there were no reported price declines. Our ex-China index also strengthened, rising to 87% from 62% the prior week, the highest level since June.

Strength Still Most Evident in Flat-Rolled.

China recorded eight price increases this week, followed by the U.S. with four, Turkey with three, Brazil with two, and Italy, Southeast Asia, Europe, and India each with a single price rise. Turkey and Japan posted one price decline each this week. There were seven price increases for flat-rolled products, followed by pipe, rebar, and beam with three, merchant bar with two, while billet, plate, and wire rod reported a single price rise. Flat-rolled products and beams each reported one price decline.

Relative Domestic Prices Still Hitting Record Lows; Meaningful Upside in Domestic Prices Seen.

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While hot-rolled coil and beam prices are strengthening on a relative basis, domestic prices continue to be remarkably low vs. the rest of the world driven by a weaker economy in the U.S. compared with other regions, particularly China.

Normal premia in the U.S. market ranges from $35 to $60 a ton; this is simply not the case today. Rebar prices in the U.S. in December have fallen $48 a ton or 10% from November and are down still more sharply relative to all other regions where prices have risen. A $65-a-ton rebar price increase for January seems assured in our view; rebar prices are at a 10-year record low vs. Japan and near that same level vs. China.

Plate prices have fallen 7% in December, and are down relative to China and Europe. Absolute hot-rolled coil prices in the U.S. have risen 5% in the month and are up relative to China, Europe and Japan, but still near record low levels. Domestic beam prices increased by $25 a ton, or 4%, in December and are up relative to China, Japan, and Europe which have posted an increase of 1.7% and decreases of 0.2% and 4.8%, respectively.


Global steel prices continue to rise in an increasingly volatile pricing environment. We expect the upward trend in domestic prices to continue in the near and intermediate term, supported by low relative prices, depleted inventories, a reduction in imports, and a pickup in exports.

Michelle Galanter Applebaum spent more than 20 years as a managing director at Salomon Brothers in New York and was the No. 1-rated steel analyst from 1988-2003, according to Institutional Investor magazine. In 2003, Ms. Applebaum formed Steel Market Intelligence, a 5-person Chicago-based equity research boutique providing advisory services to institutional investors. In addition to publishing 10-15 reports/week, Ms. Applebaum sponsors numerous CEO-level meetings for her investor clients during the year. She is regularly quoted on Bloomberg, Dow Jones, The New York Times and makes frequent appearances on CNBC and other news programs. Ms. Applebaum lives near Chicago with her husband, visiting children and 2 dogs.