According to Goldman Sachs, the steel sector could rally in early 2011 as rising prices lure investors who have sat on the sidelines for too long.

According to the report by Goldman analysts Mr Sal Tharani, Mr Sandeep SM and Mr Athena Maikish, but any rebound will likely be held in check by lingering weakness in the US construction industry, leaving steel sales well below historical levels through at least 2012.

Analysts said that weak demand has made investors skittish about steel companies, and many have been waiting on the sidelines for signs that the market is improving. Those signs should begin to reveal themselves this winter, as seasonal demand picks up and higher costs push steel prices higher.

The report said that "We do not believe that current weak market fundamentals reflect the true demand level or that they are sustainable.”

The report said that still, the recovery will be long and relatively weak. The primary drag on sales will be a weak commercial construction industry, which has yet to recover from the real estate crash. About 25 percent of available commercial real estate will sit empty next year, more than twice the normal rate over the years.

The analysts said that even after a winter rally, steel sales will probably remain 25% below historic levels.

(Sourced from AP)