China’s manufacturing returns to expansion in Oct, steel market still cautious

China’s manufacturing activity returned to expansion in October after contracting for five straight months, the National Bureau of Statistics said Nov. 1, a trend supported by the country’s stimulus blitz in late September.

Steel market sources said China’s manufacturing steel demand is expected to remain steady at least in the near term, with growth momentum coming mainly from sectors such as automobiles, home appliances, shipbuilding, and clean energy.

However, the sources added, uncertainty remains around the positive steel price momentum seen in late September, as improvement in manufacturing steel demand was very modest, and steel production again rose in October.

According to NBS data, China's manufacturing industry purchasing manager index (PMI) increased to 50.1 points in October, up from 49.8 points in September. A reading above 50 indicates expansion. Before October, the manufacturing PMI was in expansion in March and April, at 50.9 and 50.4 points, respectively.

The PMI's sub-index of manufacturing production increased to 52 points in October, up from 51.2 points in September.

New orders returned to expansion in October at 50 points, after contracting for the previous five months.

New exports contracted in October for the sixth month straight, at 47.3 points, down from 47.5 points in September.

Some market sources said government subsidies for consumer goods trade-ins had promoted the consumption of cars and home appliances.

Meanwhile, the rising equity market, spurred by the latest stimulus, helped restore confidence in consumer spending in October, the sources said.

“If the government can stabilize home prices and create a capital environment that allows the stock market to continue upwards, the domestic private consumption will improve in 2025, and thus benefiting manufacturing steel demand,” said a trade source.

However, trade and mill sources were all concerned that China’s exports of steel and steel-manufactured goods might come under pressure in 2025, as trade conflicts are already on the rise and the US presidential election is likely to further impact global trade.

“It’s a bare fact that China’s overall steel demand has already peaked and entered a long-term downtrend along with the property development sector ... any further stimulus may spur steel prices in the short term, but in a longer term, China’s steel market trend in 2025 will still depend on how well steel makers put their production under control, as I don’t think construction steel demand can improve, and there is also not much incremental steel demand from manufacturing as well,” said a mill source.

Due to improved manufacturing activity and better steel market sentiment on the latest fresh stimulus, the average Chinese domestic hot-rolled coil price in October increased to Yuan 3,554/mt ($499/mt), up 13% from the average in September, based on S&P Global Commodity Insights data.

However, according to trade sources, the average HRC price in October was still 6% lower year-over-year, as the improvement in demand was modest, while HRC production was higher in October than in September.