The latest readings on steel and coal for the 10 days to March 20 suggests the steel economy remains slow and vulnerable. Coal burn appears to be doing a little better without fading hydro generation, suggesting power generation has improved.
CISA estimates of production were up 1.6%YoY, which is a little better than the first 10 days, although is still slow.
Large mills surveyed by CISA have much more inventory than this time last year, at a little over 2 days of production. This is only part of the inventory picture, with traders currently destocking off a lower base than last year.
But the fact the mill inventories are rising even with low growth in production suggests sentiment towards future consumption growth isn't good.
Coal burn (as implied by inventory movements at large power plants) grew by 5%YoY in the 20 days to March, following 7%YoY growth earlier in the month. While this is a welcome improvement, these data are still lower than 2012 data, which highlights the difficulties facing coal markets.
Interpreting coal burn to broader macro conditions is a little trickier than for steel demand, given the impact of changes in hydro generation. At this stage it doesn't look like the gain in coal is due to changes in the generation mix, with hydro output rising YoY in the first 2 months of the year.
So these data suggest power generation and perhaps industrial production is a little better in March than the first two months of the year.
After falling to very low levels in early March, SHIBOR rates have been spiky in the latter stages of the month.
Overnight rates remain decidedly lower, on average this month, especially compared to late last year.
One week rates, however, have jumped sharply on tensions created by uncertainties surround defaults. This has brought interbank rates with maturities longer than overnight back to levels seen in late 2013.
So what does this mean? It still appears to me that policymakers are trying to ease policy rather than tighten, but aren't rushing to flood these markets with liquidity as to better manage moral hazard.
Can central banks manage such a balance? It is certainly not easy, with credit booms and busts tending to be all or nothing affairs. For that reason its better to stay cautious at this stage even if there are signs policy makers are looking to turn things around.
