September's industrial steel trend largely matched the expectations signaled by the leading PMI indicator, as modest demand release combined with rising costs pushed prices higher.

Based on September's steel industry conditions and manufacturing PMI data, the supply-demand imbalance in the overall steel market may narrow further, but considering weakening raw material cost support and active selling sentiment, steel prices in October are expected to fluctuate with a slight upward bias.

As the most important leading indicator, the PMI index holds significant meaning for the steel industry. This article attempts to analyze possible October conditions in the steel market by interpreting both the steel industry PMI and manufacturing PMI data.

September Steel Market Analysis: Market Self-Adjustment Accelerates

September's steel market performed slightly stronger overall, driven primarily by cost increases and a modest recovery in supply and demand. Multiple rounds of coke price hikes took effect, coking coal supply remained tight, and steel mill production costs rose by approximately 80 yuan per tonne month-on-month. Losses in rebar and hot-rolled coil deepened, strengthening mills' resolve to support prices and proactively cut output, providing solid support for spot prices.

Meanwhile, seasonal "Golden September" expectations, pre-holiday restocking, and resilient manufacturing demand drove a month-on-month improvement in apparent consumption, with inventories declining modestly, further underpinning prices.

However, real estate construction remained weak, infrastructure funding conversion stayed slow, and hot-rolled coil inventories were high year-on-year, leaving demand unable to fully absorb supply. This caused hot-rolled coil gains to lag behind rebar, and by late September, signs of cost softening and pullbacks from highs had already emerged.

By product, rebar averaged 3,175.18 yuan per tonne in September, up 2.91% month-on-month, while hot-rolled coil averaged 3,320.27 yuan per tonne, up 1.27% month-on-month.

Manufacturing PMI Analysis: Steel Demand from Manufacturing Continues to Improve

Data released by the Service Industry Survey Center of the National Bureau of Statistics and the China Federation of Logistics and Purchasing showed that in September 2026, the manufacturing Purchasing Managers' Index (PMI) came in at 50.1%, up 0.30 percentage points from the previous month and slightly above the 50% boom-or-bust line.

Among sub-indices, the important production index stood at 51.70% this period, up 1.30 percentage points from the prior reading, indicating accelerating demand growth for steel and other upstream raw materials. The new orders index for September was 50.50%, down 0.10 percentage points from the previous reading but maintaining positive growth. The purchases volume index was 51.00%, up 0.50 percentage points from the prior period. Taken together, manufacturing enterprise order levels continued to recover in September compared with the previous month.

From a price transmission perspective, the input prices index continued to rise by 4.2 percentage points to 60.80%, while the ex-factory prices index reached 54.00%, up 3.60 percentage points from the previous period, indicating that price transmission remains uneven.

By enterprise type, PMI readings for small and medium-sized manufacturing enterprises remained below the 50% boom-or-bust line at 48.90% and 49.70% respectively, while the PMI for large enterprises in September was 50.60%, unchanged from the previous period.

For the steel market, large enterprises mostly rely on direct supply from steel mills, while small and medium-sized enterprises purchase more from the open market. This partly explains the current persistent weakness in market demand alongside no significant reduction in overall steel mill production and operations.

October Steel Price Outlook: Prices Expected to Fluctuate with a Slight Upward Bias

Combining conditions in the steel industry and downstream manufacturing, overall steel demand continues to improve. Expectations for increased maintenance and production cuts at steel mills in October are rising, with reduced production scheduling, and supply-demand pressure may decline further.

However, the first round of coke price reductions has taken effect, and cost support for steel is expected to weaken further in October. Given that October has limited trading days and mills and traders tend to be actively selling during certain periods, steel price fluctuations may be limited. Considering the continuous increase in maintenance and production cuts, the overall market is expected to strengthen modestly in the mid-to-late part of the month.