China’s steel manufacturing improves further in Sep, but sluggish demand weighs

China’s steel manufacturing demand improved further in September, a trend likely to continue in the near term, but market participants expect only modest growth as sluggish domestic consumption and global trade uncertainty weigh on the outlook.

Market sources said keeping production under control remains key to stabilizing China’s steel industry, which will continue to dictate the sectoral trend.

China’s manufacturing production index of steel consumption produced by S&P Global Commodity Insights stood at 129 points in September, up from 113 points in August and 102 points in July. It was also higher than 118 points a year ago.

The index is based on production data from China's National Bureau of Statistics for 18 steel-related manufactured goods, categorized into seven sectors and weighted according to their share of steel consumption. The monthly production average in 2018 is used as the baseline of 100.

In September, manufacturing of machineries, shipbuilding, home appliances, containers, power generation and railway facilities sectors posted a year-on-year increase, while only vehicles recorded a year-on-year decline in production, according to the latest NBS data.

“While exports of China’s manufactured goods have remained strong, government subsidies for consumer goods spending and anticipated further fiscal stimulus will also provide support to the sluggish domestic consumption. So, I think the manufacturing steel demand overall will remain healthy for the rest of 2024,” said a mill source.

“But I’m afraid 2025 will be a year full of uncertainties for China’s exports of steel and manufactured goods, with trade conflicts already on a rise and the US presidential election likely to have a further impact on international trade,” he added.

The export volume of China’s vehicles and home appliances over January-September rose 22% and 27% on the year, respectively, while the export value of the general-purpose machineries in dollar term over the same period increased 11% on the year, latest customs data showed.

The Chinese domestic flat steel market has recently improved, thanks to the healthy manufacturing steel demand, and output cuts at some flat steel producers in September.

Some market sources said flat steel production rebounded in October, but output growth had been generally modest, which will continue to support the steel market.

According to NBS data, the production of medium-thick hot rolled coil, a proxy of flat steel products, fell 5.4% on the month and 6.4% on the year to 17.107 million mt in September. However, the medium-thick HRC output over January-September was still 2.1% higher on the year.

Output cuts have led HRC inventories at major spot markets to 2.14 million mt as of Oct. 10, down 12.7% from the end of August, data from China Iron & Steel Association showed. The HRC inventories were still 2.9% higher on the year, but largely narrower from a 22.4% year-on-year growth in early September.

The Platts-assessed Chinese domestic HRC price was at Yuan 3,480/mt ($489/mt) Oct. 22, up from 2,990/mt Sept. 6, Commodity Insights data showed.