The manufacturing purchasing managers’ index published by the National Bureau of Statistics rose to 51.1 points in July from 50.9 in June. The sub-index for production edged up to 54 from 53.9, while the new orders index increased to 51.7 from 51.4.

          There was also improvement in the sub-index for export orders to 48.4 in July from 42.6 in June, but the measure remained technically in contraction due to a lack of demand from overseas markets.

          China’s steel industry has been largely domestically-focused in recent months, with the country becoming a net importer of steel in June.

          China's exports of flat steel plunged 31% year on year in June to 2.2 million mt, taking first half exports to 17.57 million mt, down 15% on year, latest China Customs data showed.

          Market sources expected flat steel exports to remain low in the current quarter as China's domestic HRC market – the proxy for flat steel – strengthened in July, incentivizing mills to focus on the domestic market.

          The HRC spot price in Shanghai has risen 7% to date in July to stand at Yuan 3,970/mt July 30, up from Yuan 3,720/mt ($532/mt) at the start of the month, S&P Global Platts data showed.

          Southeast Asian HRC import prices have also risen around 7% in July, but were almost $100/mt lower than Chinese domestic prices, prompting flat steel exporters in India, Japan and South Korea to target the Chinese market.

          China's strong domestic HRC market has been driven mainly by improving end-user demand, as well as speculative purchases by traders on the back of easing credit.