Steelmakers Fight Price Declines

The declines come after prices for the metal rocketed from November through early spring this year, as mills successfully passed along the higher cost of raw materials to their customers. Global prices for iron ore, coking coal, and scrap metal had all risen sharply over the course of 2010, largely driven by fierce demand from China, by far the world's most prolific steel-producing nation.

But since April, the North American price of flat-rolled steel, the benchmark product, has decreased from a high of $800 a ton to around $780 a ton as of this week, says Bridget Freas, a steel-industry equities analyst at Morningstar in Chicago. She attributes the decline partly to supply-chain shortages that have worked themselves out. "It makes sense that we've seen a correction to what had been quite a significant increase," she said.

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Still, the declines were sharp enough to motivate AK Steel (AKS), the US mills of Russian-owned Steverstal, and, most recently, Nucor (NUE) to announce price hikes of about $40 a ton.

It remains to be seen, analysts say, whether those hikes will stick. Buyers will likely tell steelmakers that demand remains weak. With industry capacity utilization at 75% -- a "mediocre" number, says Freas -- buyers have some evidence on their side.

Meanwhile, analysts expect steelmakers to report strong second-quarter results. But all eyes will focus on what companies will say about the third quarter. A choppy economic recovery plus volatile steel and raw materials prices has clouded the outlook for the second half of the year.

In light pre-holiday trading Friday, metals and mining stocks were mostly in the green. U.S. Steel (X) shares were rising 1% to $45.77, down from the 52-week high of about $64, reached in February along with shares in the rest of the commodities-linked sectors.

Nucor, AK Steel, and Steel Dynamics (STLD) were also trading higher Friday, up between 1% and 2%.