The BHP Group Ltd (ASX: BHP) share price tumbled in September as weak iron ore prices deepened a rout in shares of iron ore-related companies.
Its 14% fall in August was painful, but the 17% decline in September felt like the nail in the coffin.
The BHP share price has now erased all its recent hard-earned gains, down 13% year-to-date and up just 2.9% in the last 12-months.
Why the BHP share price continues to free fall in September
China fully committed to emission targets
An acceleration in China's efforts to control steel production and emphasis on energy consumption weighed on the BHP share price last month.
Chinese leaders have made a commitment to hit carbon reduction targets, even if it comes at the expense of extreme energy rationing and damaging its industrial output.
S&P Global reported that China is on track to reduce its 2021 crude steel output below 2020 levels for the first time since 2016.
China's August crude steel output declined 13% year-on-year and was down 4.1% month-on-month to 80.24 million metric tonnes, the lowest since March 2020.
According to S&P calculations, China's crude steel output is "likely to drop further in September … and remain lower in October, as a few major steelmaking provinces have widened steel output cuts since early September due to energy consumption controls."
Rise in steel scrap consumption
Chinese policymakers are targeting the increased use of recyclables to meet its carbon neutrality goals.
According to S&P Global, this could see a rise in steel scrap consumption, replacing iron ore.
The National Development and Reform Commission sees China's 2025 steel scrap usage rising to 320 million mt on carbon neutrality goal, its latest data showed. China used 260 million mt steel scrap back in 2020, replacing 410 million mt 62% iron ore.
Chinese manufacturing figures slump
A slowdown in the Chinese economy could add further insult to injury for the BHP share price.
China's official manufacturing purchasing managers' index (PMI), a survey of sentiment among factory owners, fell to 49.6 in September from 50.1 in August.
These figures have now slumped to the lowest levels since the initial pandemic outbreak.
