Domestic steelmakers, ravaged when demand dropped off a cliff last fall as the credit crisis exploded, are facing hard decisions that could result in the permanent closure of some U.S. mills, industry analysts predict.

They are forecasting that the troubled auto industry, which accounts for 15 to 20 percent of steel demand, will order less steel in the years ahead as consumers keep their cars longer and federal fuel economy mandates result in smaller, less steel-intensive vehicles.

With nonresidential construction and other large customers suffering and smaller markets incapable of picking up the slack, steel demand will be 20 percent lower over the next five years than it was in the previous five, according to Tony Taccone of First River Consulting in Pittsburgh.

"I think you'll see some of the facilities currently idled won't come back," Mr. Taccone said.

Jeff Mindlin, of the Pittsburgh-based Mindlin Fund, which invests in stocks of commodities producers, believes the industry's problems are as severe as they have been since the early 1980s, which saw the demise of the Homestead Works and other plants that had been fixtures in the industry for decades.

"This is a real game changer," said Mr. Mindlin, who admits to being more bearish than most industry observers. "There's going to be a significant drop in the amount of steel needed."

Currently, U.S. mills are operating at 46 percent of capacity, as U.S. Steel, ArcelorMittal, AK Steel and other producers temporarily idled mills after orders evaporated. Through May, U.S. mills produced 22 million tons, down nearly 53 percent from the same five-month period last year, according to the American Iron and Steel Institute.

While the latest economic data provides encouragement that recovery may be at hand, many question how robust it will be.

Analyst John C. Tumazos, of Very Independent Research in Holmdel, N.J., forecasts U.S. mills will ship 57 million tons this year, down from 98 million last year and 106 million in 2007.

If he's on the money, it will be the industry's worst performance in more than six decades, worse than the 62 million tons shipped in 1982, one of the industry's most cataclysmic years.

He said the growing federal budget deficit will lead to higher tax and interest rates, not the type of developments that encourage consumers to purchase cars, appliances and other steel-intensive products.

"The consumer could be worse off in 2011 than he or she was in 2008 and 2009," Mr. Tumazos said.

In 2007, when cheap credit was readily available and consumers weren't worrying about losing their jobs, U.S. auto sales topped 16 million. They fell to 13.2 million last year and are on pace to tumble to 9.3 million this year based on industry sales data released this week.

CSM Worldwide, a Northville, Mich. auto industry consultant, forecasts sales of 9.7 million this year, 11 million next year and 14.8 million by 2012.

"I think getting back to 80 percent of prior levels would be a fine achievement," Mr. Tumazos said.

Adds Mr. Mindlin: "The automotive business is simply not going to be the same ever again. You're never going to get back to the 16 million, 17 million units that you had."

Federal stimulus spending will benefit steelmakers as highway, bridge and other projects produce orders for steel plate, beams and rebar used to reinforce concrete. But that is a much smaller market for the industry than Detroit, said Mr. Taccone.

Moreover, the fruits of infrastructure spending won't be shared equally among steel producers. Steel used in highway projects is made predominantly by steelmakers who melt scrap in electric furnaces. U.S. Steel and other producers who rely on iron produced in blast furnaces won't get many of those orders, Mr. Taccone said.

Some believe the weaker U.S. dollar could enable domestic steelmakers to boost exports, but that won't offset anemic demand from automakers and nonresidential construction.

Mr. Taccone estimates the market for beams and other steel used in commercial buildings is twice the size of the automotive market. Nonresidential construction usually lags housing by a year, he said. With new housing starts hitting bottom now, recovery in the commercial construction market should be about 12 months away, he said.

Speculation on the most endangered plants centers on Wheeling, W.Va., and Warren, Ohio, mills operated by Severstal International. Last month, the unit of Russian steelmaker OAO Severstal issued long-term layoff notices to workers at the mills, bringing the number of out-of-work steelworkers to 3,100.

"Those plants just aren't going to be coming back," Mr. Mindlin predicted.

So far, most U.S. producers have said their mill shutdowns are temporary. But as they burn cash by running inefficiently at sharply reduced capacity, pressure to permanently downsize could increase.