China's crude steel production plummeted to an eight-month low last month, as demand from the property and construction sectors remained feeble, keeping profit margins under pressure.
The world's largest steelmaker produced 82.11 million tonnes of crude steel in September, marking a 5% drop from the 86.41 million tonnes produced in August, as reported by China's National Bureau of Statistics (NBS). This output was also down 5.6% from the 86.95 million tonnes produced in September 2022.
NBS data showed that for the first nine months of the year, crude steel production totaled 795.07 million tonnes, a modest 1.7% increase from the previous year. However, this rise was slower than the 2.6% growth observed during the first eight months of the year.
September's figure represented the lowest production level since February, which was affected by the Lunar New Year holiday period when only 80.1 million tonnes were produced.
Analysts in the West attributed the decline in steel production to weak demand and relatively high prices for raw materials like coal and iron ore, with the weakening Yuan playing a role in this situation.
The capacity utilization rate of 247 blast-furnace-based steel mills, surveyed by consultancy Mysteel, averaged 92.76% in September, up from 91.16% in August and 88.19% in September 2022. Low iron ore stocks at ports indicated strong consumption by steel mills, and the import of cheaper and lower-quality Indian iron ore continued as a cost-saving measure due to a shortage of scrap.
SGX prices for 62% Fe fines (the benchmark Pilbara product) fluctuated between $112 and just over $117 a tonne in September, a significant drop from prices at the beginning of the year.
National Australia Bank senior economist Gerard Burg noted that the divergence in conditions between industries could explain the relatively softer growth rates in production. He pointed out that the ongoing weakness in construction contributed to the decline in cement (down 7.2% YoY) and crude steel (down 5.6% YoY) output, while electronics production increased by 4.5% YoY, and motor vehicles rose by 3.4% YoY, driven by the new energy vehicle (NEV) boom. Electricity production also surged, increasing by 7.7% YoY.
Iron ore prices continued to rise due to improved Chinese economic data. However, concerns over reduced demand stemming from lower-than-expected steel output and a prolonged property crisis tempered these gains. The most-traded January iron ore on China's Dalian Commodity Exchange (DCE) rose 0.69% to 870.5 yuan ($119.19) a tonne for the sixth consecutive session, while the SGX market in Singapore saw prices rise to $115.85 a tonne, up from $110.78 a week ago.
