China's crude steel output sets a new high in July on robust domestic demand

China's crude steel output set a record high of 93.36 mn t in Jul '20, besting the previous high of 92.2mn t set in May '20, with production ramping up close to peak levels on the back of robust downstream demand.

Crude steel output gained by 2% on an m-o-m basis while it was higher by 10% on a y-o-y basis, according to data provided by the National Bureau of Statistics.

The cumulative (Jan-Jul) CY '20, crude steel production was 596.20 mn t, up by 3% from 576.78 mn t in the corresponding months of CY '19.

What led to the boost in production?

• Construction boost- Beijing's stimulus spending increased construction activity in infrastructure projects, while the real estate sector is back in growth territory, with Jan-July property investment growth rate at 3.4% on-year. While real estate growth is far off from the 9.9% growth posted in 2019, a steady m-o-m increase in new investments will be positive for steel demand.
  
  
• Manufacturing rebound- Industrial growth for July was flat from June at 4.8% on-year but several key steel-consuming sectors are showing strong growth, with automobile manufacturing growing by 21.6% in July and equipment manufacturing growth of 9.6% though non-automobile transport equipment growth was slower at 1.4%.
  
  
• Shortage of steel products in the country- The flat steel segment's hot band products were in short supply as demand increased with the re-opening of the economy. In the Jun-Jul period, the producers had increased hot band steel production despite a production curb in the Tangshan province until 30 Sep '20.
  
  

Outlook- China's steelmakers have pressed the accelerator hard since the lockdown ended in March. Output rates are likely to remain around current rates until the onset of winter months when there could be a marginal, seasonal drop. Downstream demand is unlikely to slow in the near-term, as Beijing remains focused on keeping the wheels of the economy turning, while there has not been any major outbreak of COVID-19 cases since the country reopened in March.