China Steel Output Rises as Mill Profitability Falls to 7%

China's steel mills raised average daily crude steel output to 2.45 million tonnes in September, but profitability deteriorated sharply, with only about 7% of producers operating in the black by month-end.

By Paul Ploumis
Published October 19, 2026

SEATTLE (Scrap Monster): China's steel mills increased their average daily crude steel output in September, even as profitability across the sector deteriorated sharply.

Average daily crude steel production rose 1.9% from August to approximately 2.45 million metric tonnes, supported by strong exports and expectations for a seasonal improvement in domestic demand.

At the same time, only about 7% of steelmakers were profitable by the end of September, according to Mysteel data cited by Reuters, down sharply from 32% in late August.

September Steel Output Totals 73.59 Million Tonnes

China produced 73.59 million tonnes of crude steel in September, according to National Bureau of Statistics data cited by Reuters.

That represented a 1.4% decline from August, even though the average daily production rate increased.

The two figures are not contradictory. September has fewer calendar days than August, so mills can operate at a higher average daily rate while producing less steel over the full month.

For the first nine months of 2026, China's crude steel output totaled 724.77 million tonnes, down 2.9% year over year.

Mill Profitability Drops Sharply

The more significant concern for the market is the deterioration in mill margins.

Mysteel data cited by Reuters showed that only about 7% of Chinese steel producers were profitable at the end of September, compared with approximately 32% in late August.

The decline indicates that finished-steel selling prices have struggled to keep pace with production and raw-material costs.

Domestic steel demand remains under pressure from China's prolonged property-sector downturn, even as strong exports continue to support mill operating rates.

Strong Exports Help Support Production

Chinese mills maintained relatively high production levels during September as steel exports remained strong and producers positioned for a possible seasonal improvement in domestic consumption.

However, the profitability data show that high production volumes alone are not translating into stronger earnings.

When selling prices fail to cover rising input and operating costs, mills may eventually respond by cutting production, scheduling maintenance or becoming more cautious with raw-material purchases.

Iron Ore and Coking Coal Demand Could Feel the Impact

Persistent margin pressure could have consequences beyond the steel industry itself.

When mill profitability weakens, producers may reduce fresh purchases of iron ore and metallurgical coal while drawing down existing inventories.

That means demand for seaborne steelmaking raw materials can weaken before headline crude steel production shows a major decline.

For miners, commodity traders and shipping companies, mill profitability can therefore be an important forward indicator of raw-material demand.

China's Steel Market Remains Caught Between Exports and Weak Domestic Demand

The September figures highlight the split in China's steel market.

Strong exports and continued production have kept mill operating rates relatively high, while weak domestic demand and pressure on selling prices have sharply reduced profitability.

If margins remain compressed, steelmakers may face increasing pressure to reduce output or limit raw-material purchases during the fourth quarter.

Courtesy: www.finimize.com