High frequency China: Nov remains solid

Chinese steel production remained strong in mid-November, with growth in the month tracking at 5.8%YoY in the month in the first 20 days.  Implied coal burn was softer in the last 10 days, with inventories rising in an absolute sense and remaining stable in terms of days of consumption. Even so, coal prices have bounced, with some stock build at power plants offset by destocking at ports.

So far there has been no sign that steel producers are under reporting production, a problem which has plagued the data in the past.  Perhaps this will be more noticeable in December, but on the production front things remain healthy.

Coal burn was slower than I had forecast, although this is only a 10 day period, so no need to change views just yet.

Even though coal burn looks a little weaker, it hasn't affected coal prices so much, which continue to strengthen, with assessments at QHD around the RMB585/t. Very low port stocks should see prices extended higher in the short term.

So no signs of alarm in the snippets of real activity we get intra month from these data, although its worth keeping an eye on the coal burn data.

Its also increasingly clear that monetary policy has been tightened, with SHIBOR trading at ~3.5-4% in the last couple of months, up from the 3-3.5%range seen after the big spike in June.

This probably has had less of an effect than western central banks from a signalling perspective, with no announcement from the PBC providing no intent to markets.  Nevertheless, it is clear that the central bank is in tightening mode, which does create risks, particularly when activity has been so good.