China crude steel output and apparent steel consumption increased in August, while apparent demand is currently running higher than real demand. This should mean either a fall in prices or cutbacks in production over the coming month, Kallanish notes.

Crude steel output was up by 3% year-on-year to 68.57 million tonnes in August, but still down -0.1% over January-August at 536.32mt, according to the National Bureau of Statistics. This suggests the capacity elimination campaign has had little real influence on actual national production.

Steelmakers were encouraged to keep production high in August, either because of the rebound in steel prices or to compensate for restrictions in September. Signs of a reduction were already emerging at the beginning of September, however. Kallanish learns from Shagang that they were drawing down their inventories last week.

Apparent steel consumption was still down -2.45% y-o-y over January to August, but was up 4.97% y-o-y in August. This was largely because net exports decreased 10.13% to 7.9mt. Adjusting for inventories, Chinese real steel demand slipped further in August. Real demand appears to be down -7.66% y-o-y to 54.94mt.

Sectors such as real estate have seen investment fall steadily through the year (see separate article), while less steel intensive sectors have continued to grow. Falling steel demand and growing GDP continue the trend of falling steel intensity of the Chinese economy.