According to data from the China Iron and Steel Association (CISA), the average daily output of pig iron and crude steel at its member mills declined by 3% and 4%, respectively, compared with mid-August. Compared with the same period last year, output was down 3.4% for pig iron and 3.1% for crude steel.

Despite the decline in production, steel mills are unlikely to make significant additional production cuts in September, as the traditional peak season for steel consumption approaches and the recent rise in steel prices has improved market sentiment. The average operating rate of blast furnaces in China at the beginning of September was also broadly unchanged from the end of August.

However, the recent increase in steel prices has been driven mainly by higher prices for coking coal, coke, and iron ore, rather than by a meaningful improvement in downstream demand. Both the hot-rolled steel and rebar markets are expected to see some seasonal improvement in demand in September. Nevertheless, inventories remain relatively high, and it remains uncertain whether the current upward trend in steel prices can be sustained throughout the month.

Overall, domestic steel demand remains relatively weak, and even during the traditional peak season in September, a significant improvement in consumption may be difficult to achieve. If steel mills do not further reduce production, the upside potential for steel prices in September could be limited.

While some steel mills expect steel prices to remain relatively stable in September, the combination of seasonal demand improvement, rising raw material costs, and continued support from strong export demand should provide some upward momentum. Therefore, China's steel prices are likely to see a moderate increase in September, although the upside may remain limited.