While North American steel prices continuing to rise slightly this month, world steel prices are sliding off cyclical July peaks in China, other Asian markets and the European Union. That's because offshore supply is beginning to outpace demand – especially in China, the biggest user and maker of the metal, which has turned from a net importer of the metal to an exporter. In fact, Business Week's Asia Online edition reports from Seoul that "the Korean steel sector is suffering from a glut of gargantuan proportions, thanks to a flood of exports from China."

The worry is that steel prices could fall further, particularly if Beijing is really serious about wrestling down the Chinese economy that is expanding at a breakneck pace. China, which produces a third of the world's steel demand, will have to accelerate its export push if its domestic economy really needs cooling off. "The biggest issue frankly is how sustainable is global demand in the face of increased supply, led by China," says analyst Piers Hillier at WestLB Asset Management in London. "If global demand slows, your ability to raise prices abates." UBS Securities analyst Peter Hickson in London writes that "rising steel supply, driven by relentless Chinese production and a rebound in output from the rest of the world, will buoy inventory and hurt global prices this year and next." Lakshmi Mittal, head of Mittal Steel, disagrees with the UBS forecast. "Looking forward, we expect market conditions to continue to improve, driving further growth in shipments and operating income in the third quarter," Mittal says in a statement. (When its purchase of Arcelor is complete, Mittal Steel will have a 10% slice of world steel production, three times larger than its nearest rival, and create a company with 61 plants in 27 countries, employing 320,000.)