Coal burn continues to look weak through December, with the latest reading to December 20 up only a little at 3%YoY. This is a further sign that growth industrial activity is starting to slow, with weakness more pronounced than indicated by the small move in the PMI data.
Some of the weakness in coal burn is due to better hydro generation growth, which has moved into positive YoY territory. But at this time of year, hydro is still seasonally a small proportion of total generation, so the delta in coal burn growth is still very important.
Another sign of weakness is the big drop in domestic coal freight rates in China, which have dropped very sharply into year end.
The proposed ban on Indonesian ore exports may be playing a small role here, with more smaller ships now available to the Chinese domestic coal market.
But the bigger driver is likely to be slower demand, which is not a good sign for broader activity.
