China produced 66.81 million tonnes of crude steel in July, up 2.6% year-on-year but still down from the 69.47mt produced in June, according to the National Bureau of Statistics. That figure implies a sharp contraction in demand in July however, including a year-on-year fall, Kallanish calculates.

Over January-July, China has now produced 466.52mt of crude steel, down just -0.5% y-o-y. Adjusting for yield loss and external trade that brings apparent demand down -3.67% y-o-y to 383.21mt, while July apparent demand was down -3.38% month-on-month but still up 2.11% y-o-y at 54.3mt. Compensated to a daily basis, crude steel production was down -6.49% m-o-m to 1.75m tonnes/day, the lowest level since February.

Inventory changes makes the decline even clearer. The slower pace of inventory decline this year means that implied end user purchasing was actually down -8.69% y-o-y and -7.15% month-on-month in July. Over the year to date meanwhile, end user purchasing is now down -0.95% at around 381.83mt.

There has therefore been little indication this summer to suggest demand is strong. Sustained export levels and low market inventories however have meant the market is a little tighter than expected at the start of the year. Optimism that demand can improve into the autumn could therefore still lead to another gain in prices.