China's steel industry purchasing managers index (PMI) fell by 0.7 percentage points on the month to 44.2 in September on the back of slower output and fewer new orders.
Production has declined and cost pressures have increased, while the near-term market outlook is pessimistic, said the China steel logistics professionals (CSLPC), which compiles the steel PMI index.
Slower demand, maintenance at several mills and environmental restrictions on steelmaking in north China over the past 10 days have curbed output, according to the CSLPC, with the production sub-index slipping by 6.9 points on the month to 43.2.
But raw material stocks at mills were sharply higher in September, while purchases of iron ore, coking coal and scrap steel made a modest gain.
The sub-indices for raw material stocks and purchases are still below 50 — at 49 and 47, respectively — indicating a contraction from the base level.
The domestic new orders sub-index for steel rose by 0.4 points to 37.9, although this was a very low level of demand. September sales were higher than in August as the hot and wet season came to an end and the steel market entered the high season for sales.
But demand growth was much slower than usual for September. Steel demand from the real estate and infrastructure sectors was stable during the month.
China's official manufacturing PMI remained under 50 for a fifth straight month, although the September PMI of 49.8 was the highest since April.
The slide in finished goods inventories accelerated in September. Inventories at traders across 20 cities fell by 5.1pc to 12.39mn t.
The raw material price index was higher by 17.2 points on the month at 51.9, largely on the back of higher coal, coke, iron ore and scrap steel prices.
