China’s steel mills continued production cuts in late October and early November as declining construction demand and weakening profit margins forced deeper reductions despite the traditionally low season, according to market sources.
Even as steel production falls, Chinese steel prices are expected to face resistance from weak domestic demand in November and December, with inventories remaining high despite output cuts, China-based market participants said Nov. 11.
The daily pig iron and crude steel output at China Iron and Steel Association member steel mills averaged 1.744 million metric tons and 1.817 million mt, respectively, over Oct. 21-31, down 5.8% and 9.8% from mid-October, and 7.5% and 13.2% lower than in the same period last year, CISA data released Nov. 11 showed.
For the full month of October, daily pig iron and crude steel output averaged 1.821 million mt and 1.95 million mt, respectively, down 2.9% and 3.3% month over month and 2.5% and 5.9% year over year, the data showed.
The downtrend in production has continued into November, with the average utilization rate at China’s blast furnaces currently about 88%, down roughly one percentage point from end-October and three percentage points from end-September, according to China-based trade sources.
The production cuts reflect deteriorating profit margins at steel mills, with hot-rolled coil sales margins falling to breakeven levels from Yuan 50-100/mt ($7-$14/mt) in mid-September and over Yuan 300/mt in early August, trade and mill sources said. Rebar sales are currently running losses of around Yuan 50-100/mt, they added.
Stocks high amid weak demand
Finished steel inventories at steel mills and major spot markets monitored by the CISA totaled 23.68 million mt as of Oct. 31, nearly unchanged from the end of September but 14.7% higher than a year ago, CISA data showed.
In particular, rebar market inventories — an indicator of construction steel demand — were up 46.7% year over year at 3.55 million mt as of Oct. 31, the data showed.
Hot-rolled coil market inventories — an indicator of flat steel demand primarily in manufacturing sectors — stood at 2.21 million mt on Oct. 31, up about 16.9% year over year, according to the data.
Several China-based traders said construction steel demand remains under pressure from the property downturn, while manufacturing steel demand, though solid so far, may have limited upside potential in the near term.
“I hope fresh and effective stimulus measures will be announced in December during the Central Economic Work Conference to support the property sector and consumer spending, so the steel market can gain some upward momentum, at least in early 2026,” a trade source said.
Another trade source said the property sector has recently shown signs of further decline, and the downtrend in property steel demand may continue into 2026.
The value of new home sales by 100 major developers fell 16.3% year over year to about Yuan 2.897 trillion ($406.9 billion) over January-October, with the pace of decline accelerating from 12.2% in the first nine months, according to Chinese property data provider China Index Holdings.
Meanwhile, China’s domestic passenger car retail sales — one indicator of consumer goods consumption — dropped 0.8% year over year to 2.242 million units in October, according to the China Passenger Car Association. Over January-October, passenger car retail sales rose 7.9% year over year to 19.25 million units, CPCA said.
“Domestic passenger car consumption currently remains robust,” a China-based mill source said. “However, because sales were exceptionally strong in the fourth quarter last year due to stimulus incentives, it will be difficult for passenger car retail sales to achieve further year-over-year growth in the fourth quarter this year.”
The source added that without new stimulus policies in 2026, domestic sales of consumer goods like automobiles and home appliances may have limited potential for further growth.
China’s steel production is likely to decline further over November-December amid the low season, another mill source said. However, weakening end-user demand means steel prices may struggle to gain upward momentum from production cuts and could continue fluctuating within a narrow range, the source added.
Platts, part of S&P Global Commodity Insights, assessed domestic HRC — an indicator of the flat steel market — at an average of Yuan 3,287/mt ($462/mt) over Nov. 1-11, down 1% from October’s average and 6.6% lower year over year.
The Platts-assessed domestic rebar prices — an indicator of the long steel market — averaged Yuan 3,099/mt over Nov. 1-11, nearly unchanged from October’s average but 10% lower year over year.