Factory Prices Rose 5.0%, Split 20 Points

AI Summary

China’s producer price index rose 5.0 per cent year on year in September 2026. That average hides a 20.4-point gap: purchased prices for non-ferrous metals and wire are up 20.0 per cent, ferrous metals down 0.4 per cent. In the ten days to 30 September electrolytic copper added 2,972.5 yuan a tonne while hot-rolled coil lost 11.8. A supplier’s single unit price is an average of inputs moving in opposite directions. The copper content is the part that moved, and it is the part you can price to the fen.

What happened

Two releases, five days apart, describe the same month from different angles, and they agree.

On 9 October 2026 the National Bureau of Statistics published the late-September reading of its twice-monthly survey of 50 important production materials in circulation. Against mid-September, 22 prices rose, 23 fell and 5 were unchanged. Electrolytic copper (1#) rose 2,972.5 yuan a tonne to 111,742.5 — 2.7 per cent in ten days. Hot-rolled coil (4.75 to 11.5mm, Q235) fell 11.8 yuan to 3,297.1, or 0.4 per cent. Rebar added 10.8 yuan to 3,175.9. Aluminium ingot moved 33.3 yuan to 24,225.0, 0.1 per cent.

On 14 October the Bureau published the producer price index for September, the figure an earlier article read as the end of the deflation trade. Factory-gate prices rose 5.0 per cent year on year and 1.2 per cent on the month. Prices paid by industry rose 6.9 per cent year on year and 1.2 per cent on the month.

Inside the purchased-price index the split is stark. Non-ferrous metals and wire are up 20.0 per cent on the year. Ferrous metals are down 0.4 per cent. Fuel and power are up 13.6 per cent, chemical raw materials 12.6 per cent, textile raw materials 4.5 per cent, construction and non-metal materials down 2.3 per cent. Wood and pulp are flat on both the month and the year.

The extremes of the ten-day move sit outside metals. Glacial acetic acid rose 434.7 yuan a tonne to 4,584.7, a 10.5 per cent move. Sulphuric acid fell 4.5 per cent to 1,696.5. Phosphate fertiliser fell 3.8 per cent, coking coal 3.1 per cent, thermal coal 2.6 per cent.

“与9月中旬相比，22种产品价格上涨，23种下降，5种持平。” — Against mid-September, 22 products rose in price, 23 fell and 5 were unchanged.

National Bureau of Statistics of China, prices of important production materials in circulation, late September 2026.

Why now

Three things are moving at once and only one of them is a metals story.

The metals split has been widening for most of the year, and the mining figures show where it comes from. Non-ferrous ore mining prices are up 21.4 per cent year on year; ferrous ore mining is down 3.4 per cent. Copper is being pulled by electrification demand across cables, motors, transformers and grid equipment. Steel is being held down by construction, which is why rebar added 0.3 per cent in ten days while copper added 2.7.

Energy is the second thread and it is underrated. Purchased fuel and power prices rose 3.7 per cent in a single month — the largest month-on-month move in any purchased-price category. Coal mining prices rose 9.5 per cent on the month and 35.3 per cent on the year; oil and gas extraction rose 10.4 per cent on the month. Any product that passes through a kiln, a furnace, a boiler or a smelter carries that.

The third is arithmetic. The producer price index is a weighted average of things moving in opposite directions, and a weighted average discards exactly the information an importer needs: which line of the bill moved. A supplier who quotes one number is applying that average to a specific bill of materials, and the average is the least useful figure in the conversation.

So what

The judgement: a single unit price is now a summary, and the summary is the wrong document to negotiate with.

Work the arithmetic on a mixed bill. Take a product whose cost base is 30 per cent ferrous metals, 15 per cent chemical raw materials, 12 per cent textile inputs, 8 per cent fuel and power, 5 per cent non-ferrous metals and wire, 5 per cent wood and pulp, 3 per cent construction materials, 2 per cent agricultural inputs, and 20 per cent labour, tooling and margin.

That bill moved 0.76 per cent on materials in September.

Now a copper-heavy bill — 25 per cent non-ferrous metals and wire, 15 per cent ferrous, 20 per cent chemicals, 10 per cent fuel and power, 10 per cent textile, 20 per cent other. The same weights against the same published changes give 1.23 per cent.

Per unit, the copper is the part nobody has to estimate. Every kilogram of copper in the bill cost 2.97 yuan more on 30 September than on 20 September — 2,972.5 yuan a tonne divided by a thousand. At 7.1 yuan to the dollar that is 42 cents a kilogram. The same arithmetic for the four metals that matter most:

Read down the last column. A unit with 2.4 kilograms of copper moved one dollar in ten days; a unit with six kilograms of hot-rolled steel moved seven fen the other way. The copper is 100 times the steel.

So a supplier asking 2 per cent this month on the mixed bill is asking for 2.6 times what the published material prices account for. On the copper-heavy bill, 1.6 times.

That is not an accusation. Labour, tooling, exchange rates, freight and a supplier’s own margin all move, and none of them appear in either release. It is a question with a number attached: which line of the bill is the increase on, and is it the copper.

How confident

Confirmed. The 5.0, 6.9, 20.0, −0.4, 3.7, 2.4 and 35.3 per cent figures come from the Bureau’s September producer price release of 14 October 2026. The copper, steel, aluminium, acetic acid and sulphuric acid prices come from its late-September materials release of 9 October 2026, which compares 21 to 30 September with 11 to 20 September. Both are official, dated and public. The count of 22 rising, 23 falling and 5 unchanged reproduces exactly when the release’s own table is parsed, which is how I checked the transcription.

Inferred. The bill-of-materials weights are assumptions, not observations. No release publishes the input mix of any product, and the two mixes here bracket a plausible range rather than describe a real one. The claim that a 2 per cent request exceeds the material move depends entirely on those weights; change the weights and the multiple changes. The statement that September is where the annual picture concentrates is arithmetic on the published 1.9-month averages and not a forecast.

What would change this. If the October release shows copper falling back, the ten-day move was a spike and not a repricing. If it shows ferrous turning up, the split is closing and a single unit price becomes defensible again. Both releases are monthly; the materials survey reappears twice a month and the producer price index in mid-November.

Also read: China’s Factory-Gate Prices Turned Positive, and That Ends the Wait-for-Next-Year Trade — the same index in October, read as the end of the deflation trade rather than as a split.

Also read: China’s Rare Earth Controls Are a Licence Regime, Not a Ban — the other way an input line moves: not price, but permission.

Work it out: the landed cost calculator

Different question, same method: the step-by-step guides

For you

• Importers of copper-bearing goods — cable, motors, transformers, connectors, busbar, printed circuit boards. Take the copper weight of one unit from the drawing in kilograms and multiply by 2.97. That is the ten-day cost move in yuan, and at the rate you actually pay it converts to the currency on the invoice. A 2.4 kilogram unit moved 7.13 yuan. If the requested increase is larger than that, copper is not the explanation and you can say so with the source in hand.

• Importers of steel-heavy goods — racking, shelving, frames, fasteners, structural sections. The tailwind is against the request: ferrous input prices are 0.4 per cent lower on the year and 0.2 per cent lower on the month, and hot-rolled coil fell in the ten days. A price increase in this category has no published material move behind it, so ask for the line item and let the supplier describe what it is.

• Importers with mixed bills and a furnace, kiln or boiler — chemicals are up 2.4 per cent and fuel and power 3.7 per cent on the month. Those two lines contributed 0.66 points to the mixed bill, which is most of the 0.76. The increase can be real and can be energy rather than materials: ask for the energy line separately, because it has its own published series.

Action list:

1. Get the copper weight per unit in kilograms from the drawing, not from the quote.
2. Multiply by 2.97 to get the yuan move of the last ten days.
3. Convert at the rate you actually pay, not the mid-market rate in the news.
4. Compare against the requested increase before you reply.
5. Ask which purchased-price category the rest of the increase belongs to.

The data point

The two input families sit in the same bill of materials and moved twenty points apart.

FAQ

Is China’s 5.0 per cent producer price rise inflation reaching consumers?

Not on this evidence. The rise is concentrated in producer goods: production materials are up 6.5 per cent on the year while consumer goods are down 0.1 per cent, with food down 1.8 per cent and clothing down 1.2 per cent. Within production materials the split is extreme — mining up 25.4 per cent, raw materials 9.4 per cent, processing only 3.4 per cent. So the pressure sits at the bottom of the chain, in extraction and raw materials, and has not translated into the finished consumer prices that would show up in a consumer index. For an importer the relevant number is the purchased-price line, up 6.9 per cent, which is what Chinese factories pay for what they buy.

A supplier in a different province: do these national prices apply?

The producer price index is national and weighted by output, so it describes the country rather than your supplier. The materials survey is national too, drawn from nine categories across the country without a regional breakdown. The figures give direction and magnitude, not your supplier’s price. What they are good for is a reasonableness test: if your supplier’s increase is in line with the published move, the explanation is the market; if it is several multiples of it, the explanation is something else and you can ask which.

How do I use month-on-month figures when my contract prices in dollars?

Convert the yuan move per unit and leave the currency question for the invoice. Published prices are in yuan per tonne, so a per-kilogram move is published price divided by a thousand, which is currency-independent until you convert. Do the material arithmetic in yuan, then apply the rate your payment actually uses — a contract rate, a bank rate, or the rate in the letter of credit. A mid-market rate in a cost calculation moves the answer by a per cent or two, the same order as the changes being isolated. The asymmetry matters: a rising yuan cost against a fixed dollar price compresses the margin even when the export price is unchanged.

How we calculated this

PRODUCER PRICE CHANGES (September 2026, month on month, purchased prices)
  ferrous metals                  -0.2%
  chemical raw materials          +2.4%
  textile raw materials           +0.6%
  fuel and power                  +3.7%
  non-ferrous metals and wire     +1.4%
  wood and pulp                    0.0%
  construction and non-metal      +0.7%
  agricultural inputs             +0.1%

MIXED BILL (weights are assumptions, 80% materials + 20% other)
  0.30 x (-0.2) = -0.060
  0.15 x (+2.4) = +0.360
  0.12 x (+0.6) = +0.072
  0.08 x (+3.7) = +0.296
  0.05 x (+1.4) = +0.070
  0.05 x ( 0.0) =  0.000
  0.03 x (+0.7) = +0.021
  0.02 x (+0.1) = +0.002
  material contribution = +0.761%  ->  +0.76%

COPPER-HEAVY BILL (25% non-ferrous, 15% ferrous, 20% chemicals, 10% fuel and power, 10% textile)
  0.25 x (+1.4) = +0.350
  0.15 x (-0.2) = -0.030
  0.20 x (+2.4) = +0.480
  0.10 x (+3.7) = +0.370
  0.10 x (+0.6) = +0.060
  material contribution = +1.230%  ->  +1.23%

PER UNIT OF COPPER
  2,972.5 yuan/tonne  /  1,000  =  2.9725 yuan/kg
  2.9725 / 7.1 (CNY per USD)    =  0.4187 USD/kg  ->  42 cents
  2.4 kg of copper per unit     =  7.134 yuan     ->  1.00 USD

PER UNIT OF STEEL
  -11.8 yuan/tonne / 1,000      =  -0.0118 yuan/kg
  6 kg per unit                 =  -0.0708 yuan   ->  -0.01 USD

REQUEST RATIO
  2.0% requested / 0.761% mixed        = 2.6x
  2.0% requested / 1.230% copper-heavy = 1.6x

The point

A 5.0 per cent headline is not a price you can argue with, and a single unit price is not a document you can audit. The split is where the money is: non-ferrous inputs up 20.0 per cent, ferrous down 0.4 per cent, energy up 3.7 per cent in a month. Work out the copper in one unit, convert it, and you arrive at a number in yuan that either explains the increase or does not. Suppliers who have a reason will give you the line. The ones who do not will keep quoting the average — and the average is the one figure in this release that belongs to nobody’s product.