But thanks to a growing global shortage of some types of steel -- along with a major spike in steel prices -- Zacks is starting to worry that his Erie company may soon be losing access to its most valuable commodity.

The cost of steel rod has increased by more than 60 percent during the past six months.

The material, which cost 17.5 cents per pound in late 2003, now costs Erisco 23.5 cents, plus a recently imposed 5.1-cent surcharge.

"All of the commodities we buy have been changing like that," said Thomas Weber, Erisco's vice president of sales and marketing. "The surcharge is almost a weekly thing for us." A

lmost every form of steel -- from scrap, to plates to coil -- have seen similar increases in recent months, the result of a sharp increase in demand from China and the recent consolidation of the U.S. steel industry.

To date, those factors have done little more than drive up the cost and slow delivery times.

But the rising prices are now fueling fears of an unprecedented shortage -- as customers attempt to snatch up whatever supplies they can and China increases its appetite for U.S. steel.

"Unless this problem faces a quick solution, there is a real likelihood that we are going to see a significant bump in the economy and potentially another slowdown," said U.S. Rep. Phil English, chairman of the Congressional Steel Caucus. "This is coming at the worst possible time."

At best, the steel shortage will push up costs and slow turnaround times for manufacturers and construction companies.

At worst, it has the potential to drive some companies out of business.

"The cost of steel for one bridge project has risen by $15 million since the contract was signed," said Ken Simonson, chief economist for the Associated General Contractors of America, a Washington, D.C., trade group that represents 33,500 construction contracting companies. "Few construction companies can afford to absorb cost jumps of that size. I worry that these price spikes are going to cause bankruptcies and job losses."

Scott McCain, president of Erie Concrete & Steel Supply Co., said several unique factors are conspiring to drive up prices and drive down supplies.

The largest factor is China, which has been devouring U.S.-produced scrap steel.

Chinese companies, McCain said, are outbidding their U.S. counterparts for scrap.

In turn, they are making it difficult for U.S. companies to produce steel plates, coils and rods.

"There really is enough scrap in this country to make steel," McCain said. "The problem is the Chinese are outbidding us."

Steel supplies are also getting clipped by a shortage of coke -- a component of steel -- and the recent consolidation of longtime U.S. steel producers.

That consolidation has lead to a series of closings of major mills -- leaving the industry short on capacity.

"I've never seen anything like this," said McCain, who has been in the steel supply business for 25 years. "This thing is so global it's out of the hands of the steel mills."

Making matters worse, some nervous buyers began purchasing extra steel in late 2003 in anticipation of rising prices and declining supplies.

This move helped those buyers ensure that they would be able to buy the steel they needed -- but they have made the supplies for everyone else that much smaller, McCain said.

Zacks recalled a recent discussion with one of Erisco's major customers, who asked Zacks if he would be willing to buy a four-month supply of steel rods to make sure Erisco's supply would not run out.

When Zacks replied that he didn't have the money or the warehousing space to secure that large of an order, the customer offered to buy the rods -- and store them for Erisco until they are needed.

So far, Zacks said his customers have accepted price increases that are associated with the surcharges his company is paying for steel.

But he said he is worried that the problem will grow worse without government intervention.

One possible solution would be for the U.S. to limit the export of scrap steel to China, McCain said.

Such a move would make sure U.S. companies get the supplies they need at a reasonable cost.

English, however, said there are some worries that export controls won't solve the problem.

The last time the U.S. attempted to limit the export of steel -- in 1973-74 -- the benefits were marginal, he said.

"The steel market has changed dramatically since then," English said. "It's going to take a detailed policy on the export of scrap that takes into effect all of the avenues of movement."

English said the government will also look at tapping into assets that could be used for scrap, such as the U.S. Navy's ghost fleet -- a fleet of retired vessels that could be recycled for use by U.S. companies.

While melting down decommissioned military ships may sound drastic, English said lawmakers need to investigate every option -- or risk derailing an already shaky economic recovery.

"This is as big a crisis for our manufacturing base as was facing the steel industry two years ago," he said. "The concern here is that this is an unexpected blow to the economy just as there was evidence of an upturn. Having a shortage at a time like this is about the worst-case scenario."