Steel production comps are getting worse, as we start to lap the pick up we saw in Q4 last year. At this stage there is no signs of under reporting production, with CISA mills still a steady proportion of total output. But this seems like a risk next month given steel production has been stronger than policymakers would have like.
Coal stocks are up again, but steady in terms of days of consumption. This implies coal burn is up close to 13%YoY in the month to date, although overall power generation is likely to be weaker given weak hydro output.
Rising coal stocks is the norm for this time of year and at 23 days of consumption, its a lot lower than this time last year, but still higher than periods of extreme tightness.
Some of this stock increase appears to come at the expense of destocking at ports, with some ports now quite low. For imports, it also matters where stocking at power plants is occurring. If it is central provinces that have done most of the stock building, its feasible that coastal areas will be short. Given availability at ports is becoming more limited, this could further increase interest in imports, which has picked up in the last few weeks.
But this is perhaps a sign that policymakers are looking to tighten monetary conditions. It is noticeable that average interest rates have generally been higher than before the spike in June. Rates have now risen out of the band, perhaps signalling the intent of the PBC.
So perhaps we have seen a unannounced shift in policy. At this stage its not a problem given growth looks pretty strong. But more open communication of a change in tack from policymakers may rattle some markets that have concerning fundamentals, like copper and the AUD.
