After an exceptionally strong 2004, this past year turned out to be much more mixed for the big steel and iron companies. Pricing for steel was pretty volatile throughout the year, but energy and freight prices stayed high.

As for stocks, producers of iron and specialty products did well -- Tenaris (NYSE:TS) more than doubled, Allegheny (NYSE:ATI) was up more than 65%, and CVRD (NYSE:RIO) climbed about 41%) -- while steel makers such as Mittal (NYSE:MT) and Steel Dynamics (NASDAQ:STLD) had a rougher go of it.

Of course, the big question now is what 2006 will look like for this industry.

For the iron companies, quite a bit will depend on the contract negotiations that are under way. It seems inconceivable that companies such as CVRD, Rio Tinto, and BHP Billiton will be able to come close to replicating the 70% hike they secured for this year. What's more, steel companies like Arcelor are publicly squawking about iron prices, and China seems to be hoping to use relatively lower Indian ore prices as leverage in the negotiations.

Nevertheless, the market still seems to be short of iron ore, and a price hike of between 5% and 15% would seem pretty likely -- suggesting that a company like CVRD might not replicate the tremendous revenue growth this year but still manage a solid percentage of growth on the order of the high teens to low 20s.

With steel, worldwide production is still robust (up about 6% year to date), though China alone accounts for almost all of the growth. What's interesting, though, is to see the wave of merger-and-acquisition activity around the world. Large players like Arcelor, Mittal, and ThyssenKrupp have all been busy of late. That suggests to me that not only is the market underpricing some steel assets but also that these big players are looking for economies of scale to help them improve profits and weather the next rough patch in the cycle.

Analysts by and large aren't expecting much from the steel companies next year -- estimates for companies such as Nucor (NYSE:NUE), Posco (NYSE:PKX), Allegheny, Mittal, and Steel Dynamics all call for year-on-year declines in profits. Nevertheless, there is still the chance for these companies to outperform, and I believe there's still a case to be made that some of the current stock valuations are overdiscounting the respective companies' prospects. In particular, I think investors might want to take a look at the likes of Mittal, Posco, and Steel Dynamics as possible long-term ideas.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). He does, however, have a robust collection of heavy metal albums.