China steelmakers cut output but inventories rise ahead of holiday

China's major steelmakers reduced crude steel and pig iron output in mid-September, but a weaker-than-expected seasonal demand recovery pushed finished steel inventories to their highest level in over a year, raising fresh concerns about further stock accumulation during the upcoming National Day holiday.

Data released by China Iron and Steel Association late Sept. 24 showed that daily pig iron and crude steel output at CISA member mills averaged 1.77 million metric tons and 1.922 million mt, respectively, over Sept. 11-20, down 1.4% and 0.1% from early September. The figures were also 7.4% and 7.3% lower than a year earlier, respectively.

As a result, average daily pig iron and crude steel production over Sept. 1-20 stood at 1.783 million mt and 1.923 million mt, down 1.5% and 0.8% from August averages, and 6.3% and 7.6% lower year on year.

Despite the production cuts, finished steel inventories held by mills monitored by CISA reached 17.08 million mt as of Sept. 20, up 5.1% from the end of August and 11.7% higher than a year earlier.

Several mill sources attributed the inventory build to a weaker-than-expected seasonal recovery in steel demand during September, traditionally a peak consumption period in China.

"The seasonal demand improvement in September has been subdued this year," a mill source said. "Although steelmakers have reduced output more or less, as domestic steel demand remained under pressure while soaring coking coal and coke prices continued to squeeze steelmakers' margins, the overall scale of the output reductions remains relatively limited, providing only modest support to steel prices."

A second mill source expected steel inventories to continue rising in early October as trading activity slows during China's week-long National Day holiday from Oct. 1-7, which could exert downward pressure on the market after the holiday.

Two other mill sources said domestic end-user demand for both hot-rolled coil and rebar in September was weaker than a year earlier. They added that, with no significant economic stimulus measures expected during the remainder of 2026, steel consumption was unlikely to see a meaningful recovery in October.

However, some mill sources and traders said China's steel exports remain robust and are providing a cushion for the domestic market, which should limit the downside for steel prices in October.

These sources said a key risk to monitor in October would be developments in the coking coal market. If coal supply improves marginally and its prices retreat, steel prices could be pressured downwards amid weak demand fundamentals.

The Platts-assessed domestic HRC and rebar prices were at Yuan 3,320/mt ($495/mt) and Yuan 3,090/mt, respectively, on Sept. 24, down Yuan 80/mt and Yuan 30/mt from end-August. Platts is part of S&P Global Energy.