China steel production remains sluggish

With the outlook for Chinese activity so uncertain at present, its important to get early clues as to whether things are deteriorating more rapidly or remaining solid.  The latest 10-day steel production from CISA suggests production rates remain slow, but not disastrous. Consumption growth may be a little quicker given destocking of steel, but nonetheless activity looks to be sub-par.

Its important not too look too much into the intra-month gain around this time of year.  Its affected not only by seasonality, but also by a reassessment of the contribution of small mills, which jumped sharply.

This jump is more to do with the way data is estimated rather than reality. If we look at small mills share of total production, it is usually lower at the start of year due to underreporting in the official numbers at year end.

But once small mill production comes back into the numbers in Jan/Feb, there is usually a bounce in the CISA published numbers in March.

Because it looks like the production from small mills was underestimated to a similar degree over the past two years, YoY comparisons still look valid. On this basis, total production is only up 0.6%YoY.

This number maybe spuriously accurate, given small mill production is up very strongly YoY, while large mills are down.  But the big picture is that activity remains weak.