China's 10-day annualized steel output falls to 909 million tonnes; demand rebound may be only temporary
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China's 10-day annualized steel output falls to 909 million tonnes; demand rebound may be only temporary
Ten-day crude steel output through August 20 fell 7% from the previous period and 7% year over year, while contracting housing indicators mean that the recent recovery in procurement and hot-rolled coil prices does not yet demonstrate a rebound in construction demand. Although iron ore prices rose to US$98/tonne, this was driven mainly by higher freight rates, which may continue to depress miners' realized prices in the third quarter and second half of 2026.
- The 10-day crude steel production run rate was 909 million tonnes annualized, down 7% from the preceding 10 days and 7% year over year.
- Output over the past 30 days fell 5% from the preceding 30 days and 3% year over year.
- Easing high temperatures and accelerated infrastructure projects in the second half of August may temporarily boost procurement but do not represent a recovery in the housing and construction markets.
- Iron ore spot prices rose 2% over the week to US$98/tonne, driven mainly by a renewed increase of approximately US$2–5/tonne in freight rates since early July.
- The July steel export run rate was 119 million tonnes annualized, at the high end of the historical range.
- JPMorgan maintains Neutral ratings on the London-listed shares of BHP and Rio Tinto, as well as Kumba; the Australian-listed shares of BHP and Rio Tinto are rated Overweight.
Report interpretation
Overview
Using 10-day crude steel output, steel mill profitability, inventories, exports, housing activity, and delivered and FOB iron ore prices, the report concludes that Chinese steel demand remains weak. Near-term procurement may improve as extreme heat subsides and infrastructure projects accelerate, but housing indicators have yet to show a fundamental recovery. Meanwhile, higher freight rates, rather than improved steel demand, are the main reason for the recent rise in iron ore prices.
Core views
China's average daily crude steel output for the 10 days ended August 20, 2026 equated to an annualized 909 million tonnes, down 7% from the preceding 10 days ended August 10 and also down 7% year over year, with the run rate remaining near the bottom of its historical range. On a 30-day basis, steel output fell 5% from the preceding 30 days and 3% year over year. JPMorgan also estimates China's 2026 steel output at approximately 1 billion tonnes, indicating that the latest 10-day data are materially below the run rate implied by its full-year estimate. Demand may see a temporary seasonal or project-driven improvement. Mysteel expects downstream steel procurement to rebound briefly in August as the impact of severe heat in some regions diminishes in the second half of the month and several major infrastructure projects accelerate. The modest recovery in Chinese hot-rolled coil prices over the past week is consistent with this. However, the report explicitly notes that this procurement rebound should not be regarded as a fundamental recovery in the housing or construction market. JPMorgan's China economists' housing activity index shows that major indicators, including new residential starts, completions, and sales, continued to contract in July. Steel mills also remain loss-making, although losses on hot-rolled coil narrowed slightly over the past week due solely to higher prices. Exports continue to support steel absorption. China's steel export run rate reached an annualized 119 million tonnes in July 2026, at the high end of the historical average range. Steel exports totaled 65 million tonnes in the first seven months of 2026, equivalent to approximately 11% of total steel output. In the week ended August 20, Chinese steel inventories fell 1% week over week, declining by 200,000 tonnes in absolute terms from the previous week, but remained 10% higher year over year, indicating that short-term destocking has not eliminated the elevated inventory level relative to last year. Iron ore prices diverged from weakening steel production, rising 2% over the past week to US$98/tonne. The report attributes this increase mainly to a renewed rise of approximately US$2–5/tonne in freight rates since early July rather than a significant strengthening of downstream demand. Based on the latest Australia-to-China freight rate of US$14.6/tonne, the Australian iron ore FOB price is approximately US$84/tonne, down 8%, or US$7/tonne, year to date and approximately US$3/tonne below its late-February level. The Brazilian iron ore FOB price is approximately US$62/tonne, down 18%, or US$14/tonne, year to date. Port inventories further reinforce the view that iron ore fundamentals are not tight. Iron ore inventories at Chinese ports are approximately 156 million tonnes, 10 million tonnes below their peak but still near the highest level of the past five years. With approximately two-thirds of the third quarter of 2026 already elapsed, JPMorgan expects the potential pressure from higher freight rates on iron ore miners' realized selling prices to persist into third-quarter and second-half 2026 results. Regarding equity ratings, JPMorgan maintains Neutral ratings on the London-listed shares of BHP and Rio Tinto and rates Kumba Iron Ore Neutral, while its colleague Lyndon Fagan rates the Australian-listed shares of BHP and Rio Tinto Overweight. This reflects differing ratings for separate listed securities within the same groups, but the report's industry view remains centered on weak Chinese steel output, the absence of a recovery in housing demand, and freight costs eroding miners' realized prices.
Analysis framework
The report first uses the China Iron and Steel Association's 10-day crude steel output data to assess supply changes, then evaluates the nature of demand through 30-day trends, steel mill profitability, steel inventories, exports, and housing activity indicators. It subsequently decomposes iron ore spot prices into FOB prices and ocean freight rates to explain why prices rose despite weakening steel output and uses this to assess the impact of freight rates on miners' realized prices in the third quarter and second half, before mapping the conclusions to ratings on related mining stocks.
Methodology notes
Cross-validation of steel and iron ore supply and demand
The report combines crude steel output, housing activity, downstream procurement, exports, steel inventories, and port iron ore inventories to determine whether supply contraction, demand changes, and inventory pressure corroborate one another.
Transmission of housing and infrastructure demand to steel and iron ore
Starting with the impact of housing, infrastructure projects, and weather on steel procurement, the report examines hot-rolled coil prices, steel mill profitability, and crude steel production, then analyzes their effects on iron ore demand and miners' realized prices.
Decomposition of delivered iron ore prices, FOB prices, and freight rates
The report decomposes the US$98/tonne iron ore price into the resource-side FOB price and transportation costs, demonstrating that the recent price increase mainly reflects freight rates while Australian and Brazilian FOB prices remain lower year to date.
10-day high-frequency channel check
The report uses the 10-day crude steel production run rate through a specified date and compares it with the preceding 10 days, the same period last year, and the past 30 days to rapidly identify production trends and short-term inflection points.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- BHP (BHP.AX)An Australian-listed iron ore-related stock rated Overweight by the colleague cited in the report; current price A$67.40 and latest target price A$67.
- Strengths
- The Australian-listed shares are rated Overweight.
- Weaknesses
- Exposed to an industry environment of weak Chinese steel production and rising freight rates that may depress realized prices.
- Comparison
- The group's London-listed shares, BHPB.L, are rated Neutral.
- Risks
- Higher freight rates may continue to affect realized iron ore prices in the third quarter and second half of 2026.
- BHP Group Ltd (BHPB.L, BHP LN)A London-listed iron ore-related stock on which JPMorgan maintains a Neutral rating; current price 3,572p and latest target price 3,000p.
- Weaknesses
- Rated Neutral, while the industry faces weakening Chinese steel output and rising freight rates.
- Comparison
- The Australian-listed BHP.AX is rated Overweight.
- Risks
- Higher freight rates may continue to affect realized iron ore prices in the third quarter and second half of 2026.
- Kumba Iron Ore Limited (KIOJ.J)An iron ore-related stock rated Neutral by JPMorgan; current price 24,158c and latest target price 31,400c.
- Weaknesses
- The report does not provide a positive directional rating.
- Comparison
- Rated Neutral, in line with the London-listed shares of BHP and Rio Tinto.
- Risks
- Higher freight rates and weak Chinese steel production may affect realized iron ore prices and the demand environment.
- Rio Tinto Limited (RIO.AX)An Australian-listed iron ore-related stock rated Overweight by the colleague cited in the report; current price A$179.63 and latest target price A$205.
- Strengths
- The Australian-listed shares are rated Overweight.
- Weaknesses
- Exposed to an industry environment of weak Chinese steel production and elevated port iron ore inventories.
- Comparison
- The group's London-listed shares, RIO.L, are rated Neutral.
- Risks
- Higher freight rates may continue to affect realized iron ore prices in the third quarter and second half of 2026.
- Rio Tinto plc (RIO.L)A London-listed iron ore-related stock on which JPMorgan maintains a Neutral rating; current price 7,730p and latest target price 8,100p.
- Weaknesses
- Rated Neutral, while Chinese housing activity and steel production remain weak.
- Comparison
- The Australian-listed RIO.AX is rated Overweight.
- Risks
- Higher freight rates may continue to affect realized iron ore prices in the third quarter and second half of 2026.
Key data
- 10-day crude steel production run rate909Mt annualizedAs of August 20, 2026, down 7% from the preceding 10 days and down 7% year over year
- Steel output over the past 30 days-5%Compared with the preceding 30 days; down 3% year over year
- Estimated 2026 China steel outputApproximately 1,000MtJPMorgan's full-year output estimate
- Iron ore priceUS$98/tonneUp 2% over the past week
- Increase in freight ratesApproximately US$2–5/tonneRenewed increase since early July 2026
- Australia-to-China freight rateUS$14.6/tonneUsed to estimate the Australian iron ore FOB price
- Australian iron ore FOB priceApproximately US$84/tonneDown 8%, or US$7/tonne, year to date and approximately US$3/tonne below its late-February level
- Brazilian iron ore FOB priceApproximately US$62/tonneDown 18%, or US$14/tonne, year to date
- July 2026 steel export run rate119Mt annualizedAt the high end of the historical average range
- Steel exports in the first seven months of 202665MtApproximately 11% of total steel output
- Chinese steel inventories-1% WoW, +10% YoYIn the week ended August 20, 2026, down 0.2Mt from the previous week
- Iron ore inventories at Chinese portsApproximately 156Mt10Mt below the peak but still at the highest level of the past five years
Impact & implications
The report believes the near-term improvement in steel procurement and hot-rolled coil prices is driven mainly by easing weather disruptions and accelerating infrastructure projects and cannot substitute for a recovery in housing demand as a more durable basis for growth. Rising iron ore prices primarily reflect higher freight rates, so miners may not receive a commensurate improvement in FOB or realized selling prices. Pressure from elevated freight rates may persist into the third quarter and second-half 2026 results.
Risks
- Higher ocean freight rates may continue to depress iron ore miners' realized selling prices in the third quarter and second half of 2026.
What to watch
- Monitor the impact of rising freight rates on iron ore miners' realized prices in third-quarter and second-half 2026 results.
- Monitor whether the recovery in August steel procurement can extend beyond the temporary improvement caused by easing weather conditions and accelerated infrastructure projects, and whether housing starts, completions, and sales cease contracting.