Chinese coal burn still very weak

Last weeks numbers of overall power and industrial activity in China were on the weaker side.  While Industrial Production was a somewhat softer, power generation slipped to a low 3.4%YoY in the first two months of the year.

Unfortunately the breakdown of generation sources is yet to be made available.  But looking at coal inventory data at key power plants, it does look like coal burn was weak through February.  Coal stocks usually rise during Chinese New Year, but they do continue to be higher than in the past in terms of days of consumption, sitting at 25 days at the end of the month.

This does seem to be more a function of weaker demand rather than higher supply.  Imports do remain at high levels and domestic shipments were on par with 2012 levels in January.  But more important, the implied coal burn in the latter stages of February was very weak.  In the last 8 days of the month, there doesn't appear to be much of a ramp up at all following the break, with coal burn down 10-15% compared to a similar period last year.

This has likely contributed to prompt price weakness in seaborne coal price indices as well has Chinese domestic markers. Unfortunately for producers, it doesn't seem like too much is going to change anytime soon.  This is particularly a problem for those negotiating annual contracts at present, which are going to be a shock to many Australian coal producers as flagged here way back in December.

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