Wanna guess the best-performing industry group over the past month? Nope, not semiconductors, not railroads, not even oil. It's steel. And with a more favorable pricing outlook for 2006 coming into play, there could be room yet for a company like U.S. Steel (NYSE:X) to run.

Truthfully, U.S. Steel had the sort of quarter that only a comparison relative to expectations could make appealing. Revenue was down 11%, operating income was down 59%, and net income was down 76%. Then again, change the comparisons from year over year to sequential quarters and you see revenue was up 8%, operating income was up 50%, and net income was up 17%. It's all in how you look at it, I guess.

The basic gist of the quarter was this: The company shipped less steel this quarter than it did a year ago and got less money per ton for it. Except, that is, for the tubular business, where strong energy demand boosted the average price per ton by over a third. And while the company shipped a bit less and sold it for less, the cost of inputs like energy was higher.

Now, some of the recent moves in steel probably stem from the fact that pricing appears to be ticking up and energy prices have (at least for the moment) leveled off. There's also optimism that the Chinese government might rein in unprofitable steelmakers and force some consolidation.

But you also can't ignore the impact of M&A -- particularly Mittal's (NYSE:MT) recent offer for Arcelor. If that deal happens, it'll create a company with a global share of around 10% -- big enough so that other large players might want to consolidate as well. My hunch is that European companies like Corus and various Russian companies would be prime targets, but I wouldn't underestimate the possibility that U.S. Steel or AK Steel (NYSE:AKS) could draw a bid too.

Now, I'll be honest and say that U.S. Steel isn't my first choice of steel stocks, but I can't ignore a potential good value. Much as I like Mittal (which I own) and Steel Dynamics (NASDAQ:STLD), to say nothing of Nucor (NYSE:NUE), U.S. Steel looks like it could have more upside at today's prices. These are volatile and cyclical stocks, though, so don't just take my word for it -- careful due diligence is a must.

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Fool contributor Stephen Simpson owns shares of Mittal but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).