Steel industry sees a brighter third quarter

Several suspended high-speed rail projects restarted this year, which drove demand for related steel products. Meanwhile, automotive output and demand both are expected to climb between 10 and 15 percent this year, which will ensure solid demand for auto steel products, Yang said.

The real estate market remains a buffer against sliding exports and ebbing trade volumes. Thirty real estate developers announced sales results in September. They reportedly generated an aggregate 123.8 billion yuan in sales revenue, and analysts forecast that most of them will reach their annual sales targets ahead of schedule and likely set new records by the end of the year.

Analysts said the fourth quarter will be key to steel makers' profitability this year.

Domestic steel output is expected to decline modestly in the fourth quarter on softening demand, which will keep steel prices at low levels, the China Iron and Steel Association said in an analysis on its website.

"It's expected that steel production will decrease in the fourth quarter, but with a small margin. Due to low concentration in the industry structure and high homogenization among steel products, domestic steel prices can hardly surge as enterprises are scrambling for orders in a price war," said the CISA report.

"Market demand is expected to moderate in coming months due to the lower pace of steel production," the report said.

After growing for two consecutive months, China's steel price index edged down 1.54 points to 100.57 at the end of September, with the indicator slipping below the neutral 100 mark in October.

To stabilize prices, steel mills are being urged to pay more attention to restricting output, especially as crude steel output rose for a second month, the price of iron ore has been continuously on the rise, and difficulties have grown in exporting steel products.

Qiu Yuecheng, senior analyst at 96369.net, an e-commerce research platform, said average steel products prices surged 300 yuan per ton between July and August, and dipped 100 yuan in September.

"Although steel firms' profit declined along with the descending steel price in September, they will still stay profitable on average in the three months from July to September, outperforming the previous two quarters," Qiu said.