The price of scrap metal, a key raw material for some steelmakers, has hit record highs and manufacturers are likely to impose steep surcharges to cover the extra costs, analysts said on Thursday.

The American Metal Market's April scrap index rose $162 per ton to $555 per ton -- 25 percent higher than the previous record of $443 per ton in November 2004.

Six months ago, at the Bureau of International Recycling conference in Warsaw, delegates were told that demand for steel scrap in the United States was firm, with prices at around $300 for shredded and $315/320 for prime scrap.

The recent increase, which will affect mini-mill steelmakers such as Nucor Corp (NUE.N: Quote, Profile, Research) and Steel Dynamics Inc (STLD.O: Quote, Profile, Research), comes after integrated manufacturers like U.S. Steel Corp (X.N: Quote, Profile, Research) have been hit by steep rises in iron ore and coking coal prices.

"Steel prices have to go up," said analyst Charles Bradford of Bradford Research/Soleil. "And it's not just scrap. Pig iron is going to be higher in June and July."

"The large uptick (in scrap prices) will lead to substantially higher surcharges when announced around mid-month," said Michelle Applebaum, an independent steel industry analyst in Chicago.

"I have never seen scrap prices so high in 20 years," Gonzalo Urquijo, a member of the Group Management Board of ArcelorMittal (MT.N: Quote, Profile, Research) (ISPA.AS: Quote, Profile, Research), the world's largest steelmaker, told the company's investor day in New York on Wednesday.

Scrap is the major feedstock for electric arc furnaces operated by mini-mill steelmakers, while integrated steel producers make their products in blast furnaces which use coking coal to melt iron ore.