By James Hunter, Benzinga Staff Writer

The steel industry continues to suffer from overcapacity, particularly in China. 

End markets for the industry, including the auto industry, are still under pressure despite a clear improvement in worldwide economic conditions. Because of this, the steel sector has lagged most other areas of the market year to date.

With that said, investors should not be surprised that steel stocks saw increased pressure Monday. Friday after the market close, Steel Dynamics (STLD) announced weak second-quarter guidance. AK Steel (AKS) followed suit, announcing weak guidance Monday morning.

Steel Dynamics provided second-quarter earnings guidance in the range of 15 cents to 20 cents per share, below analysts' consensus estimates of 24 cents. The guidance is lower than earnings of 20 cents a share in the first quarter 2012 and 43 cents reported for the second quarter of 2011.

The company said its weaker guidance is primarily "the result of decreased sheet steel pricing, attributable to supply-side pressures from increased imports and increased domestic steel capacity." However, the company also mentioned that sheet steel demand quantities are relatively stable, and are seeing strength in the construction equipment, energy, agricultural and automotive sectors.

Monday morning, AK Steel said that it expects a second-quarter profit of between 4 cents and 6 cents a share. A recent drop in spot market pricing and an increased amount of volatility in short-term United States and global economic conditions were cited as primary drivers behind softer guidance.

Shares of most steel companies traded down on the session, including AK Steel, U.S. Steel (X),and Nucor (NUE). Steel Dynamics stood out by gaining over 1% heading into Monday's close. 

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