``The market is just in shambles,'' said Tom Ferrall, spokesman for No. 1 U.S. steelmaker USX-U.S. Steel Group. ``Our prices are off 20-30percent. The market is awash in imports and as a result, the efforts to collect on price increases have met with failure.''

Steel companies began the year believing their customers could absorb an increase in steel prices despite the U.S. economic downturn. In January, most steelmakers announced a price increase of $40 a ton for hot-rolled steel and $30 a ton for cold-rolled and coated steel effective March 1.

At the time, analysts said the integrated steel producers were jumping the gun and the market was not ready to pay those kinds of prices given weakness in demand and continued foreign competition. It appears they were right.

Price Hike Premature

One possible bright spot for the steelmakers is a push in the past week to raise prices of the plate steel products used to build infrastructure, such as bridges, ships, refineries and storage tanks. Companies believe this price hike can stick because energy shortages in the U.S. have led to demand for new plants from utilities and oil and gas producers.

But the overall picture is far gloomier.

``When we're talking about the entire marketplace, it's still very mixed,'' said Dan DiMicco, chief executive of Nucor in an interview with Reuters. ``There are some signs that things are improving a little bit, but overall the industry itself is still in a very depressed state.''

Charlotte, N.C.-based Nucor, the No. 2 U.S. steelmaker, did not raise its cold-rolled steel prices because there was already an oversupply in the market and there was a ``flood of imports'' on the product, DiMicco said.

Nucor did succeed in enforcing a $20 a ton increase on hot-rolled steel prices in March. But this has proved more the exception than the rule.

As in the past, the U.S. steel industry has pinned the blame for its lack of pricing power partly on cheap foreign imports, and has lobbied the government for protection against alleged dumping of steel at below cost by foreign producers.

However, analysts point out that overcapacity in the U.S. continues to pressure prices.

The steel industry is presently using about 76 percent of its production capacity compared with a 93percent utilization rate at this time last year, said steel analyst Brett Levy of RBC Dominion Securities in New York.

``Historically, (price) discounting has been inevitable at 80 percent,'' Levy said. ``Prices tend to firm up around 85 percent and price increases are historically inevitable around 90 percent. We're far, far away from inevitable price increases, much less any price increases at all. We need some more strength here before you can bet that prices are going to start to move up for the industry as a whole.''

That strength is not likely to come during the seasonally slow summer amid a U.S. economic slowdown where demand growth has continued to erode, said Michelle Galanter Applebaum, steel analyst at Salomon Smith Barney.

``Demand is way off and imports are way up, so you can pick your cause but it's a linear equation and there’s two variables pushing in the same direction,'' Applebaum said. ``If demand wasn't off, the imports would hurt, but not as badly.''

Applebaum said in February there were some signs of improvement in demand and because prices had come down so much and the order books were starting to stretch out a bit, a price increased seemed logical, she said.

However, demand for hot-rolled and cold-rolled steel have dropped off considerably recently and inventory levels at the service centers, which process and distribute the steel, only dropped slightly in March, she said.

Hot-rolled steel sells for between $240 a ton to $260 a ton and it is a rougher grade of steel than cold-rolled, which is often used for office furniture and car bodies. Hot-rolled is used for guardrails and car parts, industry experts said.

``There's no debating that demand is looking pretty tough,'' she said. ``If there's going to be any improvement in commodity pricing in steel, it's going to come from the supply side.''

A Wild Card In The Mix

On April 11, struggling steel manufacturer LTV Corp., which has filed for Chapter 11 bankruptcy protection, said it was permanently closing its Cleveland Works plant, which would remove about 2 million tons of hot-rolled steel off the market.

Applebaum said if the June14 closure of Cleveland Works is completed, it could help boost prices for hot-rolled steel. But she called the pending closing a ``wild card'' because the United Steelworkers Union has been in negotiations with LTV to keep it open beyond June 14.

Plate Price Increases Should Hold

While U.S. Steel's announced$30 a ton increase on sheet failed, that has not stopped it from raising prices on its plate products. On May 8 it increased plate prices by $20 a ton to $25 a ton, depending on the product, effective July 1, spokesman John Armstrong told Reuters, making those price increases public for the first time.

``We're seeing some increased backlog and the market strengthening for our plate product,’ Armstrong said. ``But our plate prices today are still considerably lower than what they were in July of 1999.''

U.S. Steel is just one of many big steel producers to raise plate prices in recent weeks as demand for plate has gone up, analysts said.

Bethlehem Steel Corp. raised the base price for plate products by $20 a ton effective July 1 because prices had reached a 20-year low, said Bette Kovach, spokeswoman.

``We did it response to the market and we did it to seek fair value for our prices,'' Kovach said.

Kovach was hesitant to express confidence that recent price hikes would hold, saying the industry faces challenges and the company will have to see ``what the marketplace will do.''  Reuters