Steel shares drop in Q3 on weaker demand outlook

ArcelorMittal, the world's largest steel maker, fell 50 percent in the quarter, closing Tuesday at $49.38. AK Steel Holding Corp.'s decline was even deeper, falling more than 62 percent from in the quarter, finishing Tuesday at $25.92.

However, most steel companies staged a rally Tuesday as the broader markets recovered some of the losses from Monday's dramatic fall following the failure of the House to pass a $700 billion bailout of the nation's financial industry.

Analysts are predicting that the steel industry is facing major challenges as the economy slows, including weaker demands from ailing segments such as the automobile sector. Scrap steel prices plummeted in late August and early September by up to 50 percent, and some analysts have said that steel makers need to cut production.

ArcelorMittal also announced in the quarter that it would lower costs by $4 billion over the next five years through better investments and job cuts.

Steel shares have fared far worse than broader markets during the quarter. The S&P 500 Index, which includes companies like AK Steel, Nucor Corp. and United States Steel Corp., was down by 13.6 during the period.

U.S. Steel's stock dropped 58 percent in the quarter, closing Tuesday at $77.61. Nucor was down 47 percent in the quarter, finishing Tuesday at $39.50.