China's crude steel production drops by 5% m-o-m in Sep'23

China's crude steel production dropped by 5% m-o-m to 82.11 million tonnes (mnt) in September 2023. Moreover, production fell by 5.6% against the same month in 2022, as per data from National Bureau of Statistics (NBS). In addition, during January-September 2023 total output increased by 1.7% y-o-y to 795.07 mnt.

On a daily average basis, crude steel output stood at 2.74 mnt during September, down by 1.8% from the previous month.

Factors behind decline in production:

1. Production cuts: Some of the Chinese steel mills have cut production as the losses have widened due to higher raw material prices including iron ore and coking coal, while steel demand continued to remain slow. Moreover, government has been imposing production cut in order to reduce carbon emissions and over production. These measures include production quotas for steel mills and restrictions on blast furnace operations.

2. Higher raw material cost: The cost of iron ore, coking coal and other raw materials used in steel production has been rising in recent months, which has put pressure on steelmakers' profitability. This has led some steelmakers to reduce production in order to limit their losses.

3. Weaker demand: Demand for steel in China continued to remain weak in recent months due to slowdown in construction sector and other industries. In addition, China's steel exports during the month have also fallen by 2.7% m-o-m to 8.06 mnt as against 8.28 mnt in August 2023 due to subdued global steel demand.

Outlook: In October, as the weather turns colder in the northeast and the production control policy is implemented in some areas, daily crude steel production may continue to fall on monthly basis.