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China Commodity Call
The mystery of Hebei steel data, part II
Weaker than expected steel production data over 2H10 seemed to go against
a number of indicators that suggested output was in fact still robust, and rising
through Q4. This week, following the release of more detailed production
statistics, we highlight several inconsistencies in the data and conclude that
China’s crude steel production could have been under-reported by around
15mt in 2010.
Again, Hebei statistics are to blame
The biggest problems with the official production data are revealed by
comparing the reported National Bureau of Statistics data for total Hebei
province production with the crude steel output of CISA mills based in Hebei.
The relationship between these data sets broke down completely in December
when Hebei based CISA mills reported production of 10.4 million tonnes,
compared to the NBS figure for total Hebei production of 9.2 million tonnes.
Estimating “real” production
By assuming a figure for non-CISA mill production in Hebei, we can generate
an estimate for total China crude steel production over the second half of
2010. We find that crude steel production could have been under-reported by
24mtpa in 3Q10 and 27mtpa in 4Q10, bringing total crude steel production for
2010 to ~640mt (compared to the reported figure of 627mt).
Our adjusted crude steel production estimates also have an impact on figures
for Chinese demand for raw materials. On our revised numbers, China’s
demand for iron ore is almost 20mt higher in 2010 than what was implied
using the NBS data. This goes some way to explaining the performance of the
spot iron ore price over the final quarter of last year.
Growth in 2011
Working on the assumption that China produced 640m t of steel last year, we
are much more comfortable about a higher production number for 2011 - a
modest 8% growth in production would result in full year production of 690mt for
this year. Given the strength of manufacturing demand, the pro-volume stance
of the government towards the construction sector and the recent assurances
from government departments that infrastructure investment will remain at a
high level, this doesn’t seem an unreasonable target. However it remains to be
seen whether this will be accurately reflected in the production data.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
China Commodity Call
The mystery of Hebei steel data, part II
Weaker than expected steel production data over 2H10 seemed to go against
a number of indicators that suggested output was in fact still robust, and rising
through Q4. This week, following the release of more detailed production
statistics, we highlight several inconsistencies in the data and conclude that
China’s crude steel production could have been under-reported by around
15mt in 2010.
Again, Hebei statistics are to blame
The biggest problems with the official production data are revealed by
comparing the reported National Bureau of Statistics data for total Hebei
province production with the crude steel output of CISA mills based in Hebei.
The relationship between these data sets broke down completely in December
when Hebei based CISA mills reported production of 10.4 million tonnes,
compared to the NBS figure for total Hebei production of 9.2 million tonnes.
Estimating “real” production
By assuming a figure for non-CISA mill production in Hebei, we can generate
an estimate for total China crude steel production over the second half of
2010. We find that crude steel production could have been under-reported by
24mtpa in 3Q10 and 27mtpa in 4Q10, bringing total crude steel production for
2010 to ~640mt (compared to the reported figure of 627mt).
Our adjusted crude steel production estimates also have an impact on figures
for Chinese demand for raw materials. On our revised numbers, China’s
demand for iron ore is almost 20mt higher in 2010 than what was implied
using the NBS data. This goes some way to explaining the performance of the
spot iron ore price over the final quarter of last year.
Growth in 2011
Working on the assumption that China produced 640m t of steel last year, we
are much more comfortable about a higher production number for 2011 - a
modest 8% growth in production would result in full year production of 690mt for
this year. Given the strength of manufacturing demand, the pro-volume stance
of the government towards the construction sector and the recent assurances
from government departments that infrastructure investment will remain at a
high level, this doesn’t seem an unreasonable target. However it remains to be
seen whether this will be accurately reflected in the production data.
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