Sector Snap: Steel shares down on 'buyers' strike'

"There's actually a buyers' strike at the moment," Soleil analyst Charles Bradford said in a telephone interview.

"Basically what happened is that the price of scrap steel plummeted in late August and early September between a third and a half, between $250 per ton and $300 per ton," Bradford said.

"But steel mills have only cut their prices by about $100 per ton, so buyers have been waiting for them to cut their prices accordingly."

He also said that heavy users of scrap steel, like Nucor Corp., Steel Dynamics Inc., Commercial Metals Co. and Gerdau AmeriSteel Corp. should see reduced costs and, thus, margin expansion.

Alternatively, integrated companies, like AK Steel Holding Corp. and United States Steel Corp., with more fixed costs may not benefit as much from the recent drop in scrap prices, the analyst said.

Beyond the steel industry, a broader market decline--accentuated by the House of Representatives defeating a $700 billion emergency rescue for the nation's financial system--weighed on all types of stocks.

In afternoon trading, AK Steel shares fell $5.01, or 17.7 percent, to $23.36; United States Steel dropped $14.67, or 16.8 percent, to $72.43; and ArcelorMittal, the world's largest steel maker, fell $10.18, or 17.9 percent, to $46.69.