Steel's (CMC) (HAYN) (SYNL) (USAP) (SCHN) Face Volatility

Steelmakers Commercial Metals Company (NYSE:CMC), Haynes International Inc. (Nasdaq:HAYN), Synalloy Corp. (Nasdaq:SYNL), Universal Stainless & Alloy Pr (Nasdaq:USAP) and Schnitzer Steel Industries (NASDAQ:SCHN) are under pressure as costs mount for raw materials and steel demand slows.

A lot of uncertainty surrounds the steel sector as evidenced by the guidance given by the largest steelmaker in the world - ArcelorMittal (NYSE:MT). Even after beating estimates for the latest quarter the stock was punished on a weak outlook, dragging down much of the sector with it.

In the short term Arcelor was able to offset higher costs of raw materials by boosting prices, but for the overall steel industry it's questionable as to how high and long they'll be able to do that.

Softer steel prices in North America and Europe point to major challenges going forward for steel companies, as margins will continue to come under pressure.

According to Banco Santander SA, costs of coking coal jumped 68 percent and iron ore 77 percent in the first quarter of 2011.

The steel industry is projected to grow at a 5.9 percent clip this year, says the World Steel Association. Some think that's at the high end of the spectrum.

Pricing will remain a challenge in light of the new pricing system put in place where steelmakers say it's harder to pass on costs to customers because of difficulty in projecting costs.

Expectations are the second half of 2011 will be slow for the industry.

Schnitzer Steel Industries (SCHN) closed Wednesday at $57.00, falling $1.34, or 2.30 percent.