China’s flash manufacturing PMI (purchasing managers’ index) was its highest in six months, signalling that the economic revival seen in recent months is gaining steam. Last week, global crude steel output data for August released by the World Steel Association showed a 5.2% increase—the highest in 2013 so far. The main reason is a 13% increase in China’s steel output, partly explained by a low base effect.

This base effect may be visible for the rest of 2013 as well. But it’s important to note that China’s steel output also rose by 1.2% over the previous month, and had increased month-on-month in July, too. The European Union’s performance continued to disappoint, while output from the Commonwealth of Independent States and North America was steady.

Data from the Indian government shows that finished steel output in August has risen by a sharp 12.1%, which can be partly explained by new capacities coming on stream. But real consumption is estimated to have increased by only 0.8%. This may put pressure on prices, unless companies are able to take advantage of a weak rupee to export surplus metal.

While global crude steel output rose smartly in August, capacity utilization is on a declining trend and is now at 75.4%, compared with 79.2% in June. This could mean producers are removing unviable capacity from the market.

The surge in China’s steel output is good news for iron ore prices. If China is able to consume the increase in its output (and not become a net exporter) that should be good for steel prices, too.

The euro zone continues to be a problem. Earlier, the steel industry faced problems in both developed and developing markets. If China’s steel appetite revives, the situation will improve. Domestic producers will have a longer wait, as economic conditions continue to be weak.