American steel makers, buffeted by import competition and a lessening demand for their products, can look forward to a slightly better year than they had in 1985, government and private analysts agreed.

But the industry still faces major structural problems that are expected to keep most companies from generating profits that are needed to modernize outdated and uncompetitive facilities.

"The industry will operate at about 70 percent of current stated capacity and prices are likely to remain relatively soft," the Commerce Department reported in its 1986 U.S. Industrial Outlook.

Contributing to the somewhat brighter picture is a downward trend in steel imports as a result of President Reagan's 15-month-old program to put restraints on sales of foreign steel. "We think that President Reagan's program is working substantially better than it has been given credit for," said Charles A. Bradford, a steel analyst at Merrill Lynch.

Peter F. Marcus, a steel analyst for Paine Webber, also sees 1986 as a slightly better year than 1985. "There's a light at the end of the tunnel that didn't exist six months ago," he said.

Imports for the first 11 months of 1985 dropped to 22 million tons, about one-fourth of the U.S. market, compared with 24 million tons, or 26.3 percent of American sales, in the same period a year earlier. Imports still were higher than the 20.5 percent penetration (18.5 percent finished steel plus 2 percent semifinished to be process in American mills) called for by Reagan, which brought cries from industry officials for tighter import curbs.

"The domestic steel industry desperately needs the increased volume that would be achieved by enforcement of the president's steel program at announced levels," said Donald H. Trautlein, chairman of the American Iron and Steel Institute and head of Bethlehem Steel Corp., the nation's third largest.

As the domestic steel makers complained, Brazil sought new, legal ways to get its steel into the country despite the quotas by arranging to ship flat-rolled slabs to Panama, where they will be converted in a new mill into pipes for sale in the United States.

The industry's real target is Canada, which has no quota arrangement with the United States and whose share of the U.S. market increased from an average 2.4 percent between 1979 to 1982 to more than 3 percent over the past two years.

But the steel industry's biggest problem is structural: Manufacturers are substituting other, lighter-weight materials for steel. In addition, as the service sector becomes the high-growth portion of the U.S. economy, manufacturing industries that use steel have remained stagnant.

"Plastic bodies for automobiles are the biggest threat on the manufacturing side. The Chevrolet Camaro and Pontiac Trans Am will have plastic bodies hanging on steel frames in the 1989 model year," wrote the Paine Webber team of Marcus, Karlis M. Kiris and Donald F. Barnett in the September issue of World Steel Dynamics.

In 1985, for instance, steel use in the United States totaled 96 million tons, down from 99 million tons in 1984, 105 million tons in 1981 and an average of 107 million tons a year during the decade of the 1970s.

Merrill Lynch's Bradford said steel consumption this year should fall between 3 and 5 percent due to the situation in the auto industry and heavy construction, both major users of steel. Frank W. Luerssen, chairman of Inland Steel Co., said, however, that he expects a slight increase in steel consumption on the basis of forecasts of a fourth year of strong demand for cars and appliances.

Luerssen predicted that domestic steel shipments would reach 76 million tons in 1986, up slightly from the 72.5 million tons sold last year. The Commerce Department also predicted an increase in domestic sales to 75 million tons, while Marcus said that domestic shipments will be in the mid-70-million-ton range.

Through it all, the Commerce Department reported "extraordinary" productivity gains for American steel makers. The government analysts said productivity grew 19 percent between 1982 and 1984, compared with a 1-percent-a-year average between 1970 and 1982.