(FORTUNE Magazine) – Just a few months after the Bush administration lifted controversial tariffs on imported steel, a new steel crisis is looming. Only this time it's not the steelmakers that are in trouble--it's their customers.

In the past eight months the price of U.S. hot-rolled steel has risen 60%. Mills are levying hefty surcharges and limiting orders. Some are refusing deliveries beyond April, leaving manufacturers that use steel to wonder how they'll be able to meet their own customers' demand come summer. That could derail key areas of the economy, from autos to appliances to construction, and perhaps even cause a bump in inflation.

The biggest culprit: China's raging economy. China now consumes 31% of all steel worldwide, and U.S. steel scrap exports to China have increased almost 25% in the past year. That, combined with surging demand in South Korea and the U.S. recovery, has caused scrap prices to rise from $100 to $150 a ton last year to as much as $350 today. The steel industry has also been hit by shortages of coke and iron ore. And the weak dollar has discouraged foreign mills from exporting steel to the U.S. It is, as one industry executive puts it, a "perfect storm."

As a result, steel mills have begun assessing what they call "surcharges." For instance, Nucor imposed $40-per-ton charges on future orders in December--and then jacked them up to $100 per ton in February.

In response, a group of steel manufacturers and consumers have formed the Emergency Steel Scrap Coalition. The group wants the Department of Commerce to prohibit scrap exports, which it hopes will hold down prices and head off shortages. Several nations, including Russia, recently imposed export controls. But their effectiveness is unclear, and many believe the Bush administration is unlikely to adopt them given the record trade deficit and the uproar caused by the now-abandoned tariffs.

Opponents are already lining up to fight the Emergency Steel Scrap Coalition, arguing that export caps are unnecessary and ill-advised. "We don't see the supply being the issue," says Scott Horne of the Institute of Scrap Recycling Industries. "What people are really complaining about is the price."

Still, some mills have begun rationing supply, leaving customers to wonder whether they'll be able to get steel at any price. International Steel Group sent a letter to customers in January saying it would start taking orders in accordance with a "strict plan." The letter continues, "Your ISG Sales Representative will be working with you on specific volume available to your company." ISG vice president Brian Kurtz defends the effort as an attempt to insure that customers' needs are fulfilled to the greatest extent possible. "We are running full out right now," Kurtz says, "and when customers call to place new orders or to increase existing orders, we simply can't take those orders anymore." Kurtz says ISG is looking to expand capacity, but hasn't yet found a way to do so.

At U.S. Steel, which has imposed $50 to $60 surcharges, chief operating officer John Surma says his company only recently began accepting April orders and may be forced to turn business away. "We are opening our order book very slowly," Surma says. "And sometimes it will take longer than usual to fill those orders, but we intend to fulfill them."

Some think the current crisis could evaporate as quickly as it arose. Prices have gone out of whack like this two or three times in the past 50 years but always recovered, says Bill Heenan, an economist at the Steel Recycling Institute: "It could last another three months, or it could last a year or 18 months, but it won't last forever," he says. For now, though, predicts Dave Andrea, an analyst at the Original Equipment Supplier's Association, "it's going to get worse before it gets better." --Jeremy Kahn