China steel output fell 7% over ten days, and the annualized export pace declined 5% sequentially

Overview

The report tracks China’s steel industry through indicators including high-frequency output from the China Iron and Steel Association, customs exports, steel and iron ore inventories, steel mill margins and iron ore prices. The latest ten-day output declined sharply, supporting the view that May 2026 may have been the production peak for the year; exports remain at historically high levels but weakened sequentially in July. Recent extreme rainfall and port disruptions may have amplified the data decline, so part of the drop may not represent a permanent deterioration in end demand of the same magnitude.

Core views

China crude steel production is entering a seasonal slowdown ahead of year-end, with 2026 output expected at about 1,000 million tonnes and 2027 output expected at about 990 million tonnes. Steel exports are forecast at 107 million tonnes and 104 million tonnes in 2026 and 2027, respectively, with the first seven months broadly on track versus the full-year forecast. Weaker steel prices while domestic metallurgical coal prices remain elevated have further worsened steel mill margins; at the same time, elevated steel and port iron ore inventories are pressuring iron ore prices and earnings expectations for related mining companies. If weather-related production and port disruptions fade, short-term output and export data may rebound, but this does not change the overall view of seasonal production cuts.

Analysis framework

The report uses ten-day and thirty-day rolling comparisons of output year-on-year, sequentially and annualized to identify production trends, and combines monthly export volume and annualized pace to assess external demand; it then cross-checks supply-demand conditions across the industry chain through steel mill margins, steel inventories, port iron ore inventories, FOB prices and freight changes, before mapping the findings to ratings on iron ore-related equities.

Methodology notes

• High-frequency industry trackingTen-day annualized crude steel output analysis

  Convert the China Iron and Steel Association’s ten-day average daily output into annualized output and compare it with the previous period, the same period last year and historical seasonal ranges.

  The latest annualized pace was about 920 million tonnes, down 7% from the previous ten days and down 2% year-on-year, used to assess short-term production momentum and seasonal inflection points.

• Trend smoothingThirty-day rolling output comparison

  Use a thirty-day window to reduce the impact of volatility in a single ten-day period and temporary disruptions.

  Output over the past thirty days fell 3% versus the prior thirty days and declined 1% year-on-year, showing that the weakness was not entirely caused by a single period of data.

• Export progress analysisAnnualized export pace versus full-year forecast

  Convert monthly exports into an annualized pace and compare cumulative exports in the first seven months with the full-year forecast.

  The annualized export pace in July was about 119 million tonnes, and cumulative progress in the first seven months was about 60% of the 2026 full-year forecast of 107 million tonnes.

• Supply-demand cross-checkInventory-margin-price linkage analysis

  Assess the tightness of the industry chain by combining steel inventories, port iron ore inventories, steel mill margins and iron ore FOB prices.

  Steel inventories are at a seasonal high, port iron ore inventories remain at the highest level in nearly five years, while steel mill margins have deteriorated and iron ore prices have pulled back, overall pointing to a weak supply-demand environment.

• Event adjustmentWeather disruption attribution

  Distinguish seasonal trends from short-term supply and logistics shocks caused by extreme rainfall and port disruptions.

  Rainfall in North China is expected to be 20% to 50% above normal levels, potentially amplifying recent declines in output and exports; therefore, the entire drop cannot be directly regarded as structural demand deterioration.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Iron ore

  The decline in China steel output will directly weaken demand for steelmaking raw materials.

  Strengths

  Restocking and logistics recovery may occur after weather and port disruptions fade, while low-cost supply remains competitive.

  Weaknesses

  Deteriorating steel mill margins, elevated steel inventories and high port iron ore inventories.

  Comparison

  The freight-adjusted FOB price from Australia to China is about US$83/tonne, down US$7/tonne year-to-date; Brazil FOB prices are down about US$10/tonne year-to-date.

  Risks

  China steel production cuts exceed expectations, inventories continue to accumulate, or end demand weakens further.

• Metallurgical coal

  Metallurgical coal is an important cost item in steel production, and its price affects steel mill margins and the raw material mix.

  Strengths

  Domestic metallurgical coal prices remain high, reflecting continued cost support.

  Weaknesses

  High metallurgical coal prices and low steel prices jointly compress steel mill margins and may prompt mills to proactively cut production.

  Comparison

  Compared with retreating iron ore prices, domestic metallurgical coal prices have been more resilient.

  Risks

  Steel mill production cuts may ultimately weaken metallurgical coal demand, while high prices may also encourage raw material substitution or reduced procurement.

• BHP Group Ltd (BHP LN)

  It has relatively high iron ore exposure, and earnings are affected by China steel demand and iron ore prices.

  Strengths

  Large-scale low-cost mining assets and diversified businesses provide defensiveness.

  Weaknesses

  Falling iron ore prices and slowing China steel production constrain earnings elasticity.

  Comparison

  The London-listed shares are rated Neutral, while Australia-listed BHP.AX is rated Overweight.

  Risks

  Further weakening in China demand, falling iron ore prices and exchange-rate volatility.

• Rio Tinto plc (RIO.L)

  Its core iron ore business is highly sensitive to the China steel industry cycle.

  Strengths

  High-quality, low-cost iron ore assets can provide a cost advantage during periods of falling prices.

  Weaknesses

  Its high reliance on iron ore makes it clearly affected by slowing China steel demand.

  Comparison

  The London-listed shares are rated Neutral, while Australia-listed RIO.AX is rated Overweight.

  Risks

  China crude steel output below expectations, persistently high inventories and commodity price volatility.

• Kumba Iron Ore Limited (KIOJ.J)

  Its business is concentrated in iron ore, so changes in prices and export logistics have a direct impact on earnings.

  Strengths

  It has pure iron ore exposure, offering higher earnings elasticity if commodity prices rebound.

  Weaknesses

  High business concentration makes it more sensitive to changes in China demand and seaborne iron ore prices.

  Comparison

  J.P. Morgan maintains a Neutral rating.

  Risks

  Iron ore prices continue to fall, logistics disruptions, and operating performance falls short of expectations.

Key data

• Ten-day annualized crude steel output pace920 million tonnesAs of July 31, 2026, down 7% from the previous ten days and down 2% year-on-year.
• Thirty-day change in crude steel outputDown 3% sequentially, down 1% year-on-yearThe sequential benchmark is the prior thirty days.
• Annualized output pace in May 20261,033 million tonnesThe report judges that this month may have been the production peak for 2026.
• Steel exports in July 202610.1 million tonnesDown 2% month-on-month and up 3% year-on-year.
• Annualized export pace in July 2026119 million tonnesThe annualized pace declined 5% sequentially but remained at a relatively high level within the historical range.
• China steel output in the first seven months of 2026About 580 million tonnesJ.P. Morgan estimate.
• Steel exports in the first seven months of 2026About 65 million tonnes in the textAbout 11% of steel output over the same period; an extracted chart title separately shows 55 million tonnes, which should be verified against the original chart.
• Steel export forecast107 million tonnes in 2026; 104 million tonnes in 2027Cumulative progress in the first seven months is broadly consistent with the 2026 forecast.
• Steel output forecast1,000 million tonnes in 2026; 990 million tonnes in 2027The estimate includes about 60 million tonnes of unreported output.
• Iron ore spot priceAbout US$95/tonneDown about 2% over the past month.
• Australia iron ore FOB priceAbout US$83/tonneFreight-adjusted, US$3/tonne below the level before the Iran conflict and US$7/tonne lower year-to-date.
• China steel inventoriesFlat week-on-week, up 12% year-on-yearAs of August 6, 2026, at the high end of the seasonal range.
• China port iron ore inventoriesAbout 157 million tonnes10 million tonnes below the peak, but still at the highest level in nearly five years.

Impact & implications

The simultaneous weakening of output, exports and steel mill margins creates short-term pressure on iron ore demand and prices, while high inventories further limit upside for prices. Lower iron ore prices will weigh on revenue and earnings from related businesses of mining companies, but large low-cost miners have cost-curve and asset-quality advantages that can provide some cushion. If exports and production recover after weather disruptions subside, related commodities and equities may see a tactical rebound; however, seasonal production cuts into year-end and elevated inventories mean that sustained upside still requires stronger demand or a supply contraction catalyst.

Risks

• Extreme weather and port disruptions may distort high-frequency data, causing recent declines in output and exports to overstate the degree of fundamental deterioration.
• Production and export recovery after weather disruptions fade may be stronger than expected, thereby driving a rebound in iron ore prices.
• If China steel output declines further versus the 1,000 million tonne forecast, it will increase pressure on iron ore demand.
• Steel and port iron ore inventories remaining elevated may prolong the destocking cycle and suppress steel mill restocking.
• Falling steel prices while metallurgical coal prices remain high may cause steel mill margins to continue deteriorating and trigger more production cuts.
• The text and the extracted chart title show 65 million tonnes and 55 million tonnes, respectively, for exports in the first seven months of 2026; the relevant ratio should be confirmed by consulting the original chart.
• Commodity prices, freight rates, exchange rates and mining company operating performance may cause actual equity returns to deviate from the industry direction assessment.

What to watch

• Whether the next ten-day crude steel output reading rebounds from the annualized low of 920 million tonnes after weather conditions normalize.
• Whether China monthly steel exports can recover, and the progress toward completing the full-year forecast of 107 million tonnes.
• Whether China steel inventories can continue to decline from seasonal highs.
• Whether port iron ore inventories fall significantly below about 157 million tonnes.
• Changes among steel prices, metallurgical coal prices and steel mill margins.
• Whether iron ore prices can hold around US$95/tonne, and the Australia FOB level of about US$83/tonne.
• Whether China’s 2026 steel output approaches the forecast of 1,000 million tonnes.
• Subsequent earnings expectations and rating changes for BHP, Rio Tinto and Kumba Iron Ore.