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Total inventories dropped to 6.4 million tonnes in July, according to figures released by the Japan Iron & Steel Federation (JISF).
Stockpiles held by producers decreased by 3.2% to 5.05 million tonnes as they cut production by 0.2% to 6.13 million tonnes but increased shipments by 2.3% to 6.29 million tonnes.
Export volumes rose by 4.5% to 2.3 million tonnes.
Domestic shipments rose by a more modest 1.1% to 3.98 million tonnes, but the figure still represents the highest volume since March.
The sharp rise in export shipments meant that the overall inventory ratio fell to a four-month low of 101.7%, as did the domestic inventory ratio, which dropped to 135.8%.
Above historic averages
The domestic inventory ratio remains well above historical averages as dealers increased their stockpiles by 0.4% to 1.34 million tonnes.
Nippon Steel, among others, has been urging its dealers to cut back on stockpiles considered to be too large.
This particularly affects H-beam and other construction-related products, in spite of healthy demand from the sector and new demand expected to come from reconstruction work in the northeast of the country, still recovering from last year’s earthquake and tsunami.
Moreover, there are increasing signs that Japan’s economy may now be feeling the effects of the global slowdown.
Data released by the Ministry of Economy, Trade & Industry on Friday August 31 showed that industrial output unexpectedly fell by 1.2% in July compared with June. Most analysts expected a healthy rise.
And government subsidies on the purchase of eco-friendly cars have almost run out, which could reduce demand despite support from a healthy auto industry.
These factors add to the unease Japan’s steelmakers feel about the growing imbalance in China’s steel supply-demand balance, which threatens to derail exports.