Howard Lohmann Sr.'s ability to bank a few bucks helped his company hang on for 30 years in the tumultuous steel industry, even though many of his competitors disappeared or found themselves in bankruptcy court.

"They folded up their tents and left," Lohmann said in his steel yard on Old Colony Road in Meriden.

Lohmann, owner of Logan Steel, which fabricates steel and metals to customers' specifications, always believed that when times were tough and money tight, if you couldn't afford it, don't spend it.

More than once, low profits forced the company to freeze hiring, halt expansion plans and, for the first time in 27 years, cut Christmas bonuses.

But Lohmann's post-World War II values of thrift and persistence paid off. Today, the seasoned steel operator — not quite a magnet — is adding another warehouse and sandblast room, pocketing more profits, hired four workers and plans to hire a half-dozen more.

The reason: an increase in steel prices that began at the start of this year and can finally be passed down to the customer because supply is so short. Local and national steel manufacturers say the shortage has forced them to look farther for alternative sources, deal with costlier shipping and turn to scrap for a source of iron.

The result is a recent scrap-metal frenzy that has many people taking another look at what's in the garage or heading to the dump. With the price of scrap quadrupling from $40 a ton last year to close to $200 a ton now, it's not surprising that Yankee Gas recently sold three Horton spheres — gas tanks — at its Cooper Street plant to a scrap-metal salvager who drove by and requested the pieces. The price of the metal paid the cost to cut and remove the city landmarks from the property. Yankee sold three more spheres at its Danbury operation.

"It's affecting everyday business," Lohmann said. "Steel prices haven't changed in 25 years. We're playing catch-up right now."

In an industry as complex and twisted as a girder in an earthquake, most agree with Lohmann's assessment, but don't agree that government intervention has helped the marketplace. Steel manufacturers are finding that the high costs, short supply, a weak dollar, global markets and government protections have put them in very different camps. On the one hand, Lohmann is profiting on the current domestic conditions, and Allegheny Ludlum's stainless steel division, which includes a rolling strip operation in Wallingford, is showing a profit for the first time since 2002's third quarter and passing on its higher costs to its customers via surcharges.

"In the spring, there was a lot of resistance (to the higher prices)," Lohmann said. "But now everyone is accepting it."

But others say the higher steel costs are negatively affecting the construction and automobile industries and will eventually hit U.S. consumers in the pocketbooks and drive down spending. Those hit hardest are companies that bid jobs based on last year's prices and must either pass on or absorb the increased price of steel. Most economists and even some in the industry say the market and not governments should govern the price.

"History shows that protectionist forces don't generally work in the long run," said Donald Klepper-Smith, chief economist and researcher for DataCore Partners LLC. "Prices are a function of market supply and demand. It says the global demand is surging and prices can't keep up. Let the market straighten itself out."

But the steel makers' claim that foreign competition and the undervaluing of China's currency created an unfair playing field, putting pressure on the government to act.

Before 2001, the world price of steel had dropped and imports to the U.S. more than doubled. That was a boon to American consumers, holding down the price of everything from refrigerators to red wagons. But the steel industry was rapidly losing money and market share to foreign competition.

In August 2001, President Bush invoked Section 201 of the U.S. trade law aimed at punishing foreign steel producers for engaging in "unfair trade practices," limiting the amount of cheap foreign steel in the United States. The government imposed new antidumping duties of up to 33 percent on imported steel and the price of U.S. steel surged as supplies decreased.

But the absence of cheap foreign steel is only one reason for the shortage and higher prices. In a recent letter to customers, Lohmann outlines other reasons: World demand for iron ore is increasing. Valuable coking coal, used to make steel, is limited after a coal mine fire in West Virginia. Coke imports retreated because of increased steel consumption in the Far East and other developing regions. And China, a historically large coke producer, is now using that supply internally to make its own steel.

Manufacturers also blame conditions on a tight supply of scrap steel and substitutes, higher shipping and fuel costs, greater global consumption and a weak U.S. dollar.

But what Lohmann and economists call "the China factor" is a major force.

"The surge in economic activity in China has been compared to America's industrial revolution," Lohmann said. "Think of the United States' appetite for goods and services during that expansive time; now translate a similar appetite for 1.4 billion people."

"China is the big kid at the table that everybody is looking at because it means less cake," Klepper-Smith said. "This represents a change in the marketplace."

Trade cuts two ways

But China's gluttony is a boon to companies such as Intergrated Industrial Systems in Wallingford, which supplies the machinery and equipment to make steel in foreign countries. According to Whitey Vaitheswarn, the company's vice president of sales, Far Eastern markets used to make up 20 to 30 percent of the company's market share. Today it's more like 60 or 70 percent and climbing. Business in Eastern European countries makes up 15 to 20 percent, with the balance remaining in the U.S.

"We still hope to do $30 to $40 million, and most is going to come from the Far East," Vaitheswarn said.

But he and others would like to scrap the anti-dumping laws because, by regulating foreign markets, they harm those that service them.

The Export-Import Bank, which is funded by the federal Treasury Department, supports the financing of U.S. goods and services for export in the hope of creating more U.S. jobs. Boeing and other companies receive billions in lines of credit annually. But because companies, such as Intergrated, produce equipment that China and other countries use to produce steel for resale in the U.S., they are denied credit and can't expand.

"Why should our industry suffer?" Vaitheswarn said. "We are restricted to $20 to $25 million because that's what our credit line will allow."

Vaitheswarn believes the law will be repealed.

Klepper-Smith isn't so sure, but believes that in this domestic cycle, high oil and steel prices are a harbinger that the risks of recession are rising.

"As we look at the business cycle, 2004 could be a growth peak, he said." Growth could slow down. I'm not predicting a recession, but the risk of recession is clearly rising."

Klepper-Smith agrees with local steel makers that the high prices will continue for at least the rest of the year.

"If the domestic expansion stays on track, I would expect upside pressure on steel prices," he said. "I'm optimistic that this business recovery is going to continue."

And to Lohmann, who knows how to find steel in a tight marketplace, that's good news.

"It stabilized the prices," Lohmann said. "You had to stop the exporting. It was a dumping ground. China use to export 4 million tons; they're not doing it anymore. It made us profitable. Every steel mill has been making money."