NEW YORK ( TheStreet) -- United States Steel ( X) gained 32% over the last month on expectations of a rise in steel prices and an improving outlook for U.S. producers.

Goldman Sachs raised its rating on the stock from Hold to Buy on Monday. "Raw material prices continue to move up with scrap now in the lead and likely soon to be followed by higher iron ore and coking coal prices, which could provide support for higher steel prices," Goldman Sachs analysts wrote in a report to clients.

Meanwhile, Keybanc Capital Markets raised its recommendation on Steel Dynamics ( STLD) from Hold to Buy, following which the stock gained a handsome 2.45%.

U.S. Steel, Worthington Industries ( WOR), Ternium S.A. ( TX) and AK Steel Holding ( AKS) lead the steel-gainers' pack with impressive one-month returns of 35.7%, 23.2%, 21.3% and 18.0%, respectively. Other steel majors, ArcelorMittal ( MT) and POSCO ( PKX), registered gains of 17% and 7%, respectively, over the past month.

During this period, the S&P 500 and Dow Jones Industrial Average registered gains of 6.77% and 5.24%, respectively.

Steel Production Rises in the U.S.

Weak fourth-quarter results and a tempered outlook triggered a strong correction in steel stocks, with the S&P 500 Steel Index dropping 13.2% in January and creating a buying opportunity. However, since February, the index is up 24.6%, having gained 10.3% during this month alone, signaling a return in investor confidence in the steel industry.

An improved demand outlook, driven by strong automobile production growth, has boosted production levels and utilization rates at factories across the country. On Monday, the American Iron and Steel Institute, or AISI, released data for steel production capacity utilization and raw steel production, both of which stood at their highest levels since October 2008.

AISI reported steel capacity utilization in the U.S. at 69.6% on March 8, a marked improvement over the 67.3% reported on Feb. 8, and significantly higher than the 43.5% recorded in March last year. Weekly steel production was reported at 1.68 million tons, an increase of 4.86% over the previous month.

Reflecting the improving outlook, steel prices have been gradually increasing over the past few months. Prices of U.S. domestic cold-reduced coil touched $733 per short ton this week, having increased 19.4% over the past three months. Domestic hot-rolled coil prices reached $620 per short ton, up 23% over the past three months.

Good Times for Asia Players

Chinese steel demand is expected to grow by 5% to 8% during 2010, according to Fitch. The ratings agency expects good times for both Chinese and South Korean steelmakers on the back of robust demand from the automobile and construction sectors. China domestic cold-rolled steel sheet prices touched 5823 yen per MT Wednesday, up 3.8% over the last month.

BHP Billiton ( BHP)reported Monday that it had reached a deal for a significant portion of its hard coking coal volumes for 2010. According to reports, the company won a 55% increase in coking coal prices from a key Japanese steel producer. Supplies of coking coal have been tightening in tandem with global economic recovery.

Reports of this price negotiation have triggered a new wave of optimism in the Asian steel industry. Analysts say that this agreement partially lifts the uncertainty of price negotiations between the region's steel producers and the other major iron ore producers, Rio Tinto ( RTP) and Vale ( VALE).

Analysts forecast that the annual iron ore price negotiations will lead to a sharp increase in Asian spot steel prices. Industry experts reckon that the elevated prices in China will be above the cash-costs of U.S. producers and, therefore, lead to lower imports and a faster revival of the U.S. steel industry.