Looking back at August 2026, the domestic steel market initially softened before rallying, with price levels shifting upward. During the first ten days of the month, steel prices fluctuated at low levels, continuing the trend typical of the July off-season. However, in the latter half of the month, a sharp rise in coking coal and coke prices strengthened cost support; coupled with growing expectations for the "Golden September" peak season, both finished steel and raw material prices rose in tandem, marking a transition from a "negative feedback-driven decline" to a "cost-driven rebound."

Blast Furnace Plant Operating Rates Dip Slightly; Electric Arc Furnace Rates Show Marked Recovery

Regarding steel mill production, operating rates at blast furnace plants saw a slight decline, while those at electric arc furnace (EAF) plants rebounded significantly. As of August 26, the operating rate of domestic independent EAF steel plants—tracked by the Zhaogang.com Industry Big Data Research Institute—stood at 45.45%, up 5.45 percentage points month-on-month but down 5.46 percentage points year-on-year. For blast furnaces, the operating rate of domestic plants tracked by the institute was 76.04%, down 0.32 percentage points month-on-month and 2.23 percentage points year-on-year.

In terms of steel output, data as of August 26 showed the total weekly production of domestic construction steel at 2.9968 million tonnes—an increase of 39,100 tonnes (1.32%) month-on-month, but a decrease of 321,000 tonnes (9.68%) year-on-year. Meanwhile, the total weekly production of domestic hot-rolled coils tracked by the institute was 3.7251 million tonnes, up 68,700 tonnes (1.88%) month-on-month and down 18,800 tonnes (0.5%) year-on-year. Steel consumption saw a slight rebound in August; terminal demand is expected to improve marginally in September.

Regarding apparent steel consumption, as of August 26, the apparent consumption of construction steel stood at 3.0561 million tonnes—an increase of 87,600 tonnes (2.95%) month-on-month and 26,900 tonnes (0.89%) year-on-year. Apparent consumption of hot-rolled coils was 3.683 million tonnes—up 91,500 tonnes (2.55%) month-on-month but down 28,700 tonnes (0.77%) year-on-year.

Steel inventories declined slightly but remained above levels from the same period last year.

In terms of inventory, total domestic steel stocks fell slightly in August but remained higher than the levels seen a year ago. As of August 26, data from the Zhaogang.com Industry Big Data Research Institute showed total construction steel inventory (mill stocks plus social stocks) at 8.3114 million tonnes—a month-on-month decrease of 210,800 tonnes (2.47%) but a year-on-year increase of 652,500 tonnes (8.52%). Total hot-rolled coil inventory (mill stocks plus social stocks) stood at 4.1591 million tonnes—up 79,600 tonnes (1.95%) month-on-month and 846,500 tonnes (25.55%) year-on-year.

Profitability improved for blast furnace steel mills, while losses narrowed for electric arc furnace (EAF) mills.

Regarding steel profitability, blast furnace mills saw improved earnings in August, while losses at EAF mills narrowed. As of August 26, the production profit per tonne of rebar was -116 RMB/tonne for blast furnace mills and -146 RMB/tonne for EAF mills (based on Zhaogang.com data)—representing month-on-month increases of 77 RMB/tonne and 34 RMB/tonne, respectively. For hot-rolled coils, the production profit per tonne at blast furnace mills was -104 RMB/tonne, up 26 RMB/tonne month-on-month. Intensifying Tug-of-War Between Demand and Costs: September Steel Market Likely to See Volatile Gains

As the domestic steel market enters the traditional "Golden September" peak season, it faces a critical test of whether end-user demand will meet market expectations.

Regarding demand, the subsiding of hot and rainy weather is improving outdoor construction conditions across both northern and southern regions. End-user demand is entering a window of seasonal release; coupled with expectations of downstream restocking ahead of the Mid-Autumn Festival and National Day holidays, a month-on-month improvement in demand is highly probable.

On the supply side, steel mills continued to face losses in August, dampening their willingness to voluntarily ramp up production. However, with the implementation of four rounds of coke price hikes driving up costs—and a simultaneous recovery in finished steel prices—there is renewed incentive to restart some blast furnaces and electric arc furnaces that had been under maintenance. Consequently, a distinct tug-of-war between production restrictions and restarts is expected on the supply side in September.

Regarding costs, support remains generally strong but is showing signs of shifting from a robust trend to a more volatile pattern. In the coking coal and coke sector, high-pressure safety inspections in Shanxi and a structural shortage of high-quality low-sulfur prime coking coal—combined with voluntary production cuts by coke producers facing losses—have led to the rapid implementation of four rounds of coke price hikes, providing support for steel prices. However, expectations of improved customs clearance for Mongolian coal and fluctuating news regarding coal mine restarts have increased volatility in coking coal futures. As for iron ore, global shipments remain at medium-to-high levels and port inventories stay elevated; overall supply is relatively loose, and prices lack independent drivers, moving primarily in tandem with finished steel prices.

Overall, the supply-demand balance in the domestic steel market is expected to see marginal improvement in September, though the strength of the demand recovery remains to be verified by actual data. Coupled with a slight easing of cost support from coking coal and coke, steel prices are likely to maintain a trend of volatile gains. Key factors to watch include the actual release of peak-season demand and the pace of production restarts at steel mills. If end-user demand exceeds expectations, the rate of inventory depletion accelerates, and steel mills strictly control output, the market could see a sustained recovery and price rise. Conversely, if demand fails to materialize as expected and production restarts accelerate, there is a risk that prices could spike before falling back. (Xinhua Finance)

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