Detailed production data for January and February (combined) – especially that for crude steel – adds to questions about whether China’s current economic rebound is slowing.
For Australian investors, figures on shipments of iron ore to China, import data from China and crude steel output (all monthly) have become key indicators of what is going on in the country’s biggest trade item and most important market.
The January-February data on exports of iron ore from Port Hedland, the import figures for both months and now the crude steel output all suggest demand and supply are in balance.
The production data for the first two months of the year revealed that China’s crude steel output rose a modest 12.9% in the first two months of 2021 to 174.99 million tonnes compared with a year earlier.
That saw iron ore prices though continued to weaken after the steel data was released with prices for 62% Fe fines delivered to Northern China falling $US2.11 a tonne to $US163.33 a tonne (on top of the $US8.67 a tonne fall last week). The price of 65% Fe fines also fell – down $US1.60 on top of last week’s $US8.60 a tonne drop.
The 174.99 million tonnes was higher than the total for January and February 2020’s of 159.1 million tonnes, according to World Steel Association monthly reports.
But it was down from the 178.91 million tonnes in November and December, 2020, indicating a slight slowing in the pace of activity.
But average daily output was 2.97 million tonnes across the two months, up from 2.94 million tonnes in December and compared with a daily average of 2.58 million tonnes in Jan-Feb, 2020, according to Reuters.
Analysts point to the cold winter and smog related curbs on production in major steel producing cities as reasons why production was down on November-December. But steel production was sharply lower than the 33.5% jump in output from a year ago which was boosted by the weak performance at the start of 2020 due to the Covid lockdowns.
And while cement output (like steel, its key to the infrastructure boom) rose by 61% from the first two months of 2019, the rise in electricity output was also comparatively modest – up by 19.5% year on year, far less than the rise in production.
But the production data also showed a massive boom in some products – computer production increased by 112% yoy and mobile phones by 49.2% yoy.
Motor vehicle production rose by almost 90% from a very depressed January-February 2020.
The rise in vehicle production was almost matched by sales totalling 3.958 million units for January and February, up 76.9% year-on-year. That was after falls of 18.7% and 79% in January and February 2020 respectively.
February saw a 365% year-on-year jump to 1.455 million, the eleventh straight month of increases.
Sales of new energy vehicles (NEVs), which include battery-powered electric, plug-in hybrid and hydrogen fuel-cell vehicles surged 585% from a year earlier to 110 thousand units.
So consumer demand for a major purchase (after a house or apartment) remains solid and buoyant.
Over January-February, China’s total output of raw coal for all use surged 25% on year to 617.6 million tonnes, and coke output rose 10.3% on year to 79.1 million tonnes, according to the latest production report from the National Bureau of Statistics.
Helping boost production this year has been the very cold winter conditions in northern parts of the country.
That rise in coal output almost reversed the 6.3% fall for the first two months of 2020.
China’s major manufacturing surveys have continued to trend down in recent months, although they remained in positive territory.
That plus the signs of weakness (adjusted for the Covid comparison) suggests the National Australia Bank is on to something when it said in a headline on its monthly look at China’s economic data on Monday.
“Don’t be fooled by surging annual growth rates – momentum is set to slow across 2021″
