Activity indices of China’s steel sector increased in September

In October, industry indicators are likely to decline amid a slowdown in steel production

In September 2023, Purchasing Managers Index (PMI) for China’s steel sector was 45.8%, up 0.6 percentage points from August 2023. SteelOrbis reports about it with the reference to the China Steel Industry Logistics Committee (CSLC).

The index of new orders in the industry increased by 1.6 percentage points in September compared to the previous month – up to 44.5%. At the same time, indicators are still below 50%, which indicates weak confidence in the sector. The production index decreased by 1.1 pp. m/m – to 45%.

The index of purchase prices for raw materials for the month increased by 9.2 percentage points compared to August – up to 73.3%. Thus, the indicator reached the highest level since the beginning of the year.

Steel demand is expected to improve in October, while output will decline, supporting steel prices. In particular, recently the Yunnan Steel Industry Association said local factories plan to cut production due to high raw material prices.

7 Yunnan steelmaking companies will reduce construction steel output by 300,000 tons. In particular, Kunming Steel (100,000 tons), Yukun Steel (120,000 tons), Chenggang (50,000 tons) and Shuangyou (20,000 tons).

The reduction in production is due to high coal prices caused by limited supply in the region. As a result, local steelmakers often face production disruptions or significant increases in production costs, leading to unprofitability. This was mainly due to an accident at a coal mine in Guizhou’s Lupanshui province at the end of September.

As GMK Center reported earlier, China in January-August 2023 produced 712.93 million tons of steel, which is 2.6% more compared to the same period of 2022. The Chinese government has still not confirmed its intention to cap steel production in 2023 under the carbon curb policy introduced in 2021.

September steel production in the People’s Republic of China is forecast at the level of 89 million tons, as the probability of a large-scale reduction in production among steelmakers during the month is low.