With capability utilization below 50 percent, major end markets in full retreat and the cost ramifications of proposed cap-and-trade legislation looming large, steel's survival skills are being tested as never before. What will the North American steel industry look like in the next few years for those fit, fearless and flexible enough to survive?

Almost a year after the bubble burst, the steel industry is operating in the most challenging environment it has seen in decades. The unprecedented collapse in steel demand over the past nine months, and massive cutbacks made by producers as a result, left much of the industry focused on day-to-day survival.

Now, as market conditions show signs of stabilizing, an increasing number of market players are starting to speculate on what the North American steel industry might look like in the next few years. And while some remain optimistic, all agree that big changes are coming.

Or to put it another way, while steelmakers last year were raising their voices in songs of celebration—accompanied, admittedly, by a rising chorus of concern from buyers—they're now very much singing the blues.

"I'm told that Keith Richards (of the Rolling Stones) once was asked how his career would have gone without the electric guitar. 'Quieter' was his response," said James L. Wainscott, chairman and chief executive officer of AK Steel Corp., West Chester, Ohio. "I believe the steel industry will still be rocking and rolling for the long haul, but it looks like we're in for an extended 'acoustic set' in the near term."

Others agree. "Steel demand obviously is much lower now in a time of recession," said Gregory Mason, chief executive officer of Severstal International, which comprises the North American and European operations of Russian steelmaker OAO Severstal. "I think we can assume that it will take several years to come back, but we believe demand should come back to decent levels. In this country, we have a growing population and that is the best driver for demand."

No one believes that current production...