China’s official steel output increased further in October, breaking new records and exacerbating fears of looming oversupply. End user demand was strong in October (excluding the national day holiday), but with demand fading, markets are expected to weaken significantly, Kallanish notes.

In October, China produced 82.55 million tonnes of crude steel, according to the National Bureau of Statistics (NBS), up 9.1% year-on-year. That brought year-to-date output to 782.46 million tonnes, up 6.4% y-o-y. Although y-o-y growth has been exaggerated by the closure of unregistered induction furnaces, output remains up strongly on-year in real terms.

It also leaves output on track to finish well over 900mt this year. One reason this target will be easy to hit is that NBS has again been quietly revising upwards its numbers for 2017. Netting back the on-year change implies crude steel output of 735.4mt over January-October 2017, almost 26mt more than the 709.5mt originally reported for the period.

Adjusting for yield loss and net exports, apparent steel consumption in October was up 9.01% y-o-y at 74.06mt, bringing apparent demand for the year-to-date to 695.78mt, up 6.3% y-o-y. Further adjusting for inventory change, implied end user buying was 11.5% higher on-year at 73.05mt, bringing y-t-d demand up 4.96% y-o-y at 684.59mt.

End user buying in October was up 2.16% from September. Although on a daily basis this was down -1.14%, this does not take into account the holiday over the first seven days of the month. Demand in the rest of the month was up sharply from September. That demand has already begun to fade rapidly in November however, while output remains high. Steel prices are already being dragged downwards by oversupply, and the outlook for the coming months remains bleak.