During October, domestic steel prices may decline further or even diverge regionally for some time before they stand a chance of recovery, Wang Jianhua, Mysteel’s chief analyst shared in his October market outlook on September 30, explaining that a recovery may emerge if the Chinese steel mills are prompted to lower their output in response to price declines since early September.

As for demand, the pace of many construction projects in North and Northwest China may accelerate in October, and steel consumption from the automobile, electric home appliances and machinery manufacturers will stay robust, Wang predicted.

Full month consumption in October may only appear slower because of fewer working days, with the whole country being on National Day holiday over October 1-8, he noted, adding that steel inventories may decline by 500,000 to 1 million tonnes for the whole month.

Steel supply, at the same time, will probably decline though only moderately by about 3 million tonnes in terms of finished steel. The slippage will result from lower output, higher exports and lower imports, Wang predicted, though the imported billet in the previous months may lead to higher run rates among re-rollers.

Next month, many domestic blast-furnace mills may conduct maintenance either because of high in-plant steel inventories or the curtailment of production in response to restrictions imposed by local authorities for pollution control, Wang said, and as of September 27, electric-arc-furnace (EAF) steel mills under Mysteel’s survey posted losses averaging Yuan 14/tonne ($2.1/t), while those EAF mills in South China reported even steeper losses averaging Yuan 129/t, he added.

It is worth noting, though, that steel inventories – especially rebar – are still much higher than a year ago and the long holiday may see steel inventories build up further during the period. This in turn may place prices under pressure shortly after the holiday, especially in regions such as Northeast China or cities such as Beijing, Nanchang in Jiangxi and Nanjing in Jiangsu in East China, and Chengdu of Sichuan and Chongqing in Southwest China, according to Mysteel’s monitoring.

In September, China’s apparent crude steel consumption was estimated at 95 million tonnes, slightly lower than the 96.7 million tonnes for August, while daily consumption this month was higher than in August due to the one-day difference. Consequently, the total volume was still higher by about 20% on year, which has rebutted the views of some in the market that demand has not been robust, Wang shared Mysteel’s own calculation basing on official data and market surveys.

Mysteel’s tracking of daily trading volume of construction steel in September told a similar story, as the tonnage traded was higher by 2.9% on month or 5.2% on year against the growth of 1.1% and 21.8% respectively for August, he added.

“When reviewing the statistics, it is better to examine the comprehensive data over a long stretch of time to gain a better and impartial understanding of the real market situation,” Wang reminded.