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Total inventories dropped 4% from the end of the previous month to 6.38 million tonnes, according to the Japan Iron & Steel Federation (JISF) as producers in particular looked to reduce their stockpiles.

Producers' stockpiles fell 5.1% to 5.06 million tonnes, while those held by dealers edged upwards by 0.1% to 1.32 million tonnes.

“We have been working hard to reduce inventories and we are beginning to feel a bit more comfortable that we are almost reaching good levels”, an official for one steelmaker told Steel First.

But he also warned it is important going forward that production continues to match demand.

Inventories earmarked for domestic consumption dropped by 3.7% to 5.28 million tonnes as shipments rose 3.2% to hit their highest levels since October, at 3.88 million tonnes.

The fall in stockpiles was also helped by 7.9% reduction in output, to 6.06 million tonnes. Those are the lowest production volumes since April 2012.

All that meant the domestic inventory ratio, which measures stockpiles against shipments, dropped to its lowest since July, at 1.36 month's worth of supply.

The overall ratio also dropped to its lowest since July – 1.05 months' worth – as mills slashed stockpiles earmarked for export by 5.7% to 1.1 million tonnes.