China’s automotive sector typically slows in the summer, but after a brief lull in July output surged sharply again in August. That bodes well for steel demand and suggests the Chinese economy still has latent demand in some sectors, Kallanish notes.

In August China produced 1.99 million vehicles, up 26.6% year-on-year, according to the China Association of Automobile Manufacturers (CAAM). Over January-August, vehicle output is now up 10.82% to 16.85m units.

Adjusting for vehicle type, implied finished steel demand was up 22.85% y-o-y in August at 3.24 million tonnes, Kallanish calculates. Over January-August, implied finished steel demand was up 10.59% at 26.34mt.

The automotive sector is one of the few rapidly expanding areas of steel demand, and the only major growth area that is driven by consumers rather than by government spending. Having said that, one reason for the boom is government stimulus in the form of tax breaks. These resulted in a surge of demand starting in late 2015 and will come to an end in late 2016. CAAM and others have asked for an extension of the measures however.