Investors are watching the steel sector closely this week to see if a recovery might be afoot for the hard-hit market.

ArcelorMittal SA (NYSE:MT), the world’s largest steel company, is expected to report first-quarter earnings Friday following a bleak 2015. Although analysts expect the Luxembourg-based producer to report lower profits, the steelmaker could still offer hints of how the battered sector will perform in the year ahead.

Earnings for European and U.S. integrated steel producers have plunged in recent quarters thanks to falling steel prices. Competition from Chinese imports has undercut domestic supplies, while global demand in general is softening. A handful of producers have idled blast furnaces and laid off thousands of workers in response to the downturn.

Yet the next few quarters could prove brighter for troubled producers. American steelmakers, which reported first-quarter earnings last week, said they expect stronger results this year as steel prices rally. Western producers have lobbied successfully in recent months to impose heavy tariffs on the Asian imports. U.S. producers also curbed their capacity significantly, helping to stem some of their losses.

“Operations in the next foreseeable one to two quarters look better than the very negative outlook that was expected just five months ago,” said Jorge Beristain, a metals and mining analyst at Deutsche Bank. “But that doesn’t mean the sector is out of the woods just yet.”

ArcelorMittal is expected to report a loss of 29 cents per share for the first quarter of 2016, compared with a loss of 32 cents per share in the first three months of 2015, according to analysts polled by Thomson Reuters. Revenue for the quarter could reach roughly $13.7 billion — a 20 percent drop from $17.1 billion for the same period last year. 

The steelmaker, which operates in North America, Europe, Brazil and parts of Asia and Africa, said it lost more than $8 billion last year on falling steel prices and write-offs in its large mining business. Executives largely blamed “excess capacity in China” particular for the firm’s dismal 2015 results.

Chinese steelmakers in 2014 began ramping up their exports as the country’s economic slowdown curbed domestic demand for metals. Chinese steel demand fell by 5.4 percent last year, compared with a 3 percent drop globally, due to slower construction activity and mounting concerns about China’s overheated real estate market, the World Steel Association reported in April.

As China boosted its exports of steel, prices of hot-rolled coil — an important type of steel used in automobile and other manufacturing — dropped by about 40 percent in 2015. In the U.S., prices hit a low of $354 per short ton on Dec. 9, well below the roughly $400-per-ton price that U.S. integrated producers need to break even on their operations.

U.S. Steel Corp. (NYSE:X), America’s biggest steelmaker by revenues, recorded a loss of $340 million for the first quarter, or $2.32 per share. The loss was deeper than the $75 million, or 52 cents per share, recorded in last year’s first quarter. But results were better than those reported in the final three months of 2015, when the Pittsburgh company’s net loss surpassed $1.1 billion.

AK Steel Holding Corp. (NYSE:AKS), based in West Chester, Ohio, reported first-quarter net losses of $13.6 million, or 0.08 cents per share, compared with a loss of $306.3 million, or $1.72 per share, for the first three months of 2015.

China, the world’s No. 1 steel-producing country, made around 804 million metric tons of steel in 2015, nearly half the world’s total of 1.6 billion metric tons. The United States, by contrast, produced about 79 million metric tons, or roughly 5 percent of total global production.

Global players have similarly suffered the knock-on effects of tougher Chinese competition. India’s Tata Steel Ltd. said this spring it would sell off its entire U.K. business following more than nine months of consecutive losses, a move that could affect more than 15,000 workers.

Still, American producers say they remain optimistic about the rest of the year. U.S. prices of hot-rolled coil steel have rallied 45 percent from their early-December low to $514 per short ton as of April 27, in part thanks to supply cuts by U.S. Steel and AK Steel.

U.S. imports of steel are also declining after the U.S. Commerce Department adopted preliminary import duties in December. Steel imports represented around 25 percent of apparent steel demand in the first three months of this year, down from 33 percent in the same year-ago period, U.S. census data show.

“Our first quarter results reflect the challenging conditions as we started 2016, but were in line with our expectations,” Mario Longhi, U.S. Steel’s president and CEO, said in an April 27 statement. “We are well-positioned to benefit from currently improving market conditions for our flat-rolled and European segments.”

U.S. Steel last week said it filed a fresh complaint with the U.S. International Trade Commission seeking “the exclusion of all unfairly traded Chinese steel products from the U.S. market.” In the complaint, U.S. Steel accused Chinese companies of conspiring to fix prices, steal trade secrets and skirt U.S. import duties with false labeling. The ITC, an independent federal agency, has within 30 days to decide to take the case. The Chinese steel industry has denied the allegations.

The ruling could further limit Chinese steel imports to the U.S. But that doesn’t mean the U.S. or global steel markets should rest easy, Deutsche Bank’s Beristain said.

China is still exporting more steel to the rest of the world, with exports up 10 percent in the first quarter of this year compared with the same period last year, he said. Dozens of blast furnaces are reportedly firing back up as China seeks to boost production, even though domestic consumption remains essentially flat. That means Chinese exports could resurge this year despite dipping in recent months.

Steel prices could also fall again if Chinese demand for commodities declines, despite the government’s recent efforts to bolster growth by expanding access to credit.

“The overarching concern is how sustainable is this rally that we’ve seen in steel prices? And that all hinges on the outlook for China,” Beristain said. “The concern is that there seems to be some smoke signals on the horizon that China is ramping production again [without] a palpable increase in China’s demand.”