China Aug Power Output Falls First Time in 4 yrs

 

China's power output, a bellwether for economic activity, posted its first annual decline in more than four years in August, adding to evidence that the world's second-largest economy is losing momentum after a brief rebound in the second quarter.

Power output in the world's top consumer fell 2.2 percent to 495.9 billion kilowatt hours (kWh) in August from a year earlier, data showed on Saturday.

While the annual fall was in part due to the high reading last summer, when many cities were struck by a record heat wave, overall electricity production also posted its first fall in three months - a sign of slackening demand from major industrial users.

Headline data showed China's factory output grew at the lowest pace in nearly six years in August while growth in retail sales and investment also cooled, adding to signs of fragility in the economy that may prod Beijing into fresh policy measures to prevent a sharper slowdown.

Implied oil demand and crude steel production only inched up in August after falling in the preceding month, while total production from auto and glass-makers both fell from the preceding month.

China's economy has had a bumpy ride this year. Growth rebounded slightly in the second quarter from an 18-month low thanks to a stream of government stimulus measures, but weak July and August data signalled the boost from such steps is rapidly waning.

The nation's appetite for commodities has also suffered on the back of tightening credit, and as Beijing clamps down on pollution and industries with significant overcapacity.

The annual drop in China's power generation was the first since May 2009, data from the National Bureau of Statistics showed.

Power production was also down 1.8 percent from July, its first monthly fall since April.

STEEL AND CRUDE OIL

China churned out 68.91 million tonnes of crude steel in August, up 1 percent from a year earlier, with the daily production rate of 2.20 million tonnes largely unchanged from July.

Despite a slowing economy, particularly from the property sector, China's daily crude steel output has exceeded 2013's record of 2.188 million tonnes every month, as mills have been reluctant to reduce output amid fears that credit could be cut off and that market share could be seized by rival.

This has exacerbated a supply glut and caused spot steel product prices to tumble to their lowest in eight years, while steel rebar futures on the Shanghai Futures Exchange are also at their lowest ever.

The China Iron and Steel Association has warned producers not to expect any loosening of credit restrictions in the fourth quarter and urged them to refrain from raising production as the traditional peak consumption season approaches.

Meanwhile, China's implied oil demand in August rose 3.4 percent from a year earlier to 9.70 million barrels per day (bpd), rebounding from a 2 percent fall in the preceding month, according to Reuters' calculations.

The recovery in August came as refiners' crude runs edged higher and net fuel exports from the world's largest energy consumer shrank.

Reuters calculates implied oil demand by combining official figures for refinery throughput and net imports of refined products, excluding any inventory changes, which are rarely disclosed by the government.

(Additional reporting by David Stanway; Editing by Kim Coghill)