High-frequency China: Steel and coal burn stay in the slow lane

Steel production slipped into negative territory in the last 11 days of March, although consumption looks better than this given destocking at mills.  Coal burn continues to grow at ~5%YoY, with inventories also coming down.  All this suggests conditions are stable, though slow.

Crude steel production growth continues to be slow, with the small YoY fall in the later part of the month leaving the average at for March at ~0.5%YoY.

Consumption, however, was not as weak, with a sizeable draw down in inventories from mills. That said, inventories are still at high levels, so the destocking process as some way to go.

When looking at apparent demand from large mils (production + stock change), consumption is grew at ~4% in March, which is on par with the rates of growth seen in the year to date.  This is not disastrous, but is certainly weaker that 4Q13. Its also fairly slow in the context of the risks to activity in the coming quarters.

Coal burn has maintained the 5%YoY growth seen since late Feb, suggesting power generation is fairly stable.  This pick up in activity has helped erode the high levels of stocks seen ports at the end of last month.

Coal prices appear to be forming a bottom as a result of all this, but it doesn't look like the right time to be bullish.  There is still considerable uncertainty about the trajectory of top down power demand and the strength of hydro generation through the summer. So its better to sit on the sidelines until we get more information.