Latest figures from the Korean Iron and Steel Association (KOSA) show that production at EAF mills increased by 9.1 percent in the year-to-August. Despite this, scrap prices remain depressed, which we attribute to two reasons. Firstly, production has been falling month-on-month since May and the increase year-on-year is also contracting with the August figure being up just 3 percent. Secondly, economic data is not encouraging in South Korea with consumers generally pessimistic about the economy in the short term. Sentiment fell for the third consecutive month to the lowest level this year at 97.2 from 102.1 in August. Elsewhere, however, we expect prices will climb further through October as anecdotal reports suggest that supplies are low, particularly in Taiwan, while mills fear production costs such as oil will rise through the colder months, while a potential war in Iraq also concerns some traders. Domestic demand for scrap, however, is not affecting the price. As our production table on page 6 shows, we forecast EAF output to fall throughout the region in the fourth quarter. In Taiwan this is due to the round bar market weakening and imports of billet supplanting a need for domestic production.
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