Daily production of crude iron and crude steel at the member plants of the China Iron and Steel Association (CISA) from September 11 to 20 reached 1.77 million tons and 1.922 million tons, respectively, indicating a decrease of 1.4% and 0.1% compared to early September. These figures also show a decline of 7.4% and 7.3% compared to the same period last year.
Increase in Finished Steel Inventories
Despite the production decline, inventories of finished steel at CISA-supervised plants reached 17.08 million tons by September 20, reflecting a 5.1% increase compared to the end of August and an 11.7% increase compared to last year. Multiple sources from the plants pointed to this inventory increase due to weaker-than-expected demand in September, which is traditionally considered a peak consumption period in China.
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Future Outlook and Market Challenges
A source at one of the plants said, "Seasonal demand recovery in September this year has been limited." Additionally, due to pressure from domestic demand and rising prices of coking coal and coke, profit margins for the plants have been under pressure. Following these developments, it is expected that steel inventories will continue into early October, especially as business activities decline during the one-week National Day holiday in China (from October 1 to 7).
Two other sources noted that domestic demand for both hot-rolled sheets and rebar in September has been weaker than last year, and with the absence of significant economic stimulus measures for the remainder of 2026, a meaningful recovery in steel consumption in October seems unlikely.
However, some plant sources and traders stated that China's steel exports remain strong, which could act as a buffer for the domestic market and prevent price declines in October.
The main risk to watch in October is developments in the coking coal market. If coal supply improves slightly and prices decrease, steel prices may come under pressure.
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