By Yoshifumi Takemoto and Dave McCombs Oct. 15 (Bloomberg) -- Japan's scrap iron and steel prices slumped to the lowest in more than two years as a slowing global economy prompted some mills in South Korea and Taiwan to schedule output cuts, paring demand for the raw material. The average so-called H2-grade ferrous scrap price sank 33 percent to 26,020 yen ($256) a metric ton this week from a week earlier, the Japan Ferrous Raw Materials Association said today on its Web site. That's the lowest since September 2006. Japan's scrap prices, the benchmark for Asia, have plunged 62 percent from the record set in mid-July as slowing economic growth stifles demand for the metal from carmakers and builders. ArcelorMittal, the biggest steelmaker, said last week the global steel market faces an ``unprecedented situation.'' ``It was heaven in July, and since August, we're heading for hell,'' said Jun Watanabe, president of Maruwa Shoji, a Yokohama- based scrap trader. Japanese electric-arc steelmakers will be forced to cut production because September orders for steel rods were about half the normal level, he said. Steel mills in Japan, South Korea and Taiwan were running at full capacity and raising prices as demand from China had bucked the slowdown that started with a surge in U.S. mortgage defaults. ``Electric-arc steelmakers will be forced to cut prices, so any advantage from the decline in materials prices will be short- term,'' Kazuhiro Harada, an analyst at Mitsubishi UFJ Securities Co. in Tokyo, said by phone. The Japan Ferrous Raw Materials Association calculates the average scrap iron and steel prices using figures from Tokyo, Nagoya and Osaka, the country's main cities, for export and domestic customers. To contact the reporters on this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net; Yoshifumi Takemoto in Tokyo at ytakemoto@bloomberg.net

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