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Monday, 27 December 10
ANALYSIS: CHINA'S COAL PRODUCTION MISMATCHED WITH DOMESTIC DEMAND
 As reported by iStock Analyst, China's coal market has been trapped in a strange cycle. Large coal production bases are facing overcapacity, while large coal consumption provinces are in short supply of power coal.
This structural contradiction between supply and demand in China's coal market has highlighted heated discussions recently.
Coal producers facing mounting pressure of excess in output capacity
China is facing severe excess of production capacity and oversupply of coal in 2010 due to the expansion of coal production and surging imports amid sluggish demand, and this situation is expected to carry on into 2011 as new coal companies begin operation.
Wang Zhanjun, director-general of the China Coal (TSXV:CKO) Industry Association, said that China's coal supply capacity has seen a remarkable increase in 2010 due to the operation of newly formed coal companies after mergers and acquisitions.
In the first 11 months of 2010, the country's leading coal producing provinces and regions including Shanxi, Inner Mongolia, Shaanxi, and Ningxia all saw more than 20 percent growth in coal output.
According to a report by the association, in the first 11 months of 2010 China's coal output surged 15.5 percent or 418 million metric tons (tonnes) year on year to 3.039 billion tonnes, while coal sales were up 13.5 percent or 390 million tonnes to 2.892 billion tonnes. Coal deliveries increased by 15.3 percent year on year to 1.827 billion tonnes during the same period.
The investment in fixed assets in the coal industry has continued to increase this year. In the first 11 months of 2010, fixed assets investment in coal mining and washing saw 22.7 percent year-on-year growth to 320.7 billion yuan.
Meanwhile, China's coal imports keep rising while exports keep declining. In January-November, China's coal exports dropped 13.5 percent to 17.58 million tonnes, and are expected to remain low in December. Total coal exports are estimated at 19 million tonnes for the whole year.
In sharp contrast to declining exports, coal imports maintained fast growth in 2010. Net imports of coal are expected to reach 145 million tonnes in 2010.
However, China's coal demand has remained sluggish this year. Affected by the measures for energy conservation and emissions reduction, electricity consumption growth of high energy-consuming industries like ferrous metals, chemicals, non-ferrous metals, and building materials has fallen back quickly since May of 2010, which in turn has cut coal consumption severely.
Coal consumption in the steel industry moved from positive growth to negative growth in 2010.
According to official statistics, China's daily crude steel output saw fast growth in the first half of 2010 but registered three months of negative growth in the third quarter, and only increased 4.8 percent in November.
Also, coal consumption in the chemicals industry has also remained sluggish this year. According to preliminary forecasts, coal consumption in the chemicals industry in 2010 will stay at the same level as in 2009, at 140 million tonnes.
The China Electricity Council predicted that electricity demand in China would not increase much in 2010 and 2011, estimating the growth at 10 percent in 2010, 14 percentage points lower than in 2009.
Therefore, coal industry is expected to face mounting oversupply pressure in 2011 since the output of majority coal enterprises would double. Meanwhile, large numbers of coalmines in Shanxi, Henan, Shaanxi, and Inner Mongolia are scheduled to begin operation in 2011, and the coal oversupply will be aggravated by the participation of more downstream firms in power generation and metallurgy, said Wang Zhanjun, head of the China Coal Industry Association.
Wang predicted that coal supply in China would increase 300 million tonnes in 2011, and China would face excess in supply of coal.
Short supply of coal at power plants
In sharp contrast with the excessive output and supply of coal, a number of power plants in parts of China are suffering from shortages of power coal.
In Guizhou province, coal output capacity is significantly less than demand. The local coal output is expected to increase by 160 million tonnes at most in 2011, which would exacerbate the tight supply. This is because the output capacity of newly formed coalmines is inadequate to make up for eliminated production capacity, and the newly formed capacity will not come into operation until the second half of 2011.
At the same time, power plants in Guizhou cannot afford coal produced outside the province because of higher coal prices.
Similar short supply of coal has also occurred in Hubei province. Coal stocks at power plants in Hubei have remained at critical level since the beginning of this year, and sometimes were even not enough for one week's consumption.
The power coal shortage is not only a headache for power plants in non-coal production areas, but also hit power plants in major coal production areas like Shanxi and Henan.
Take the Datang Taiyuan Second Thermal Power Plant for example. The plant has suffered coal shortages four times since the beginning of 2010 because its contracted coal supplier supplied only 400,000 tonnes of coal towards meeting the 1.5-million-tonne coal contract.
As of December 4, power coal stocks of Henan have slid sharply from 3.84 million tonnes at the beginning of November to 2.65 million tonnes, far below the critical level of 3.5 million tonnes.
This has led to a daily supply shortage of 700,000 tonnes. Current coal production system might be primary cause
The short supply of power coal against excess of overall output capacity in China is believed to be caused mainly by system contradictions existing in the coal industry.
Actually, China's coal industry has trapped in a strange circle. Coal demand weakens after power plants stockpile power coal, but after the stockpiling, coal stocks of coal producers are down. Therefore, the coalmines produce more coal, which eventually leads to excess of output and excessive supply of coal.
Some coal suppliers have complained that if they carry on supplying coal according to their coal contracts with the power plants at the contracted price, the coalmines would all suffer (OOTC:WLVTQ) losses while the power plants all make profits.
A senior manager of the Shenhua Group said that it is difficult to avoid the structural contradictions of disjointed coal output and demand under the current government-capped management system. The outlook of China's coal industry remains troubled for 2011, and the problem of excessive output capacity would continue to be widespread in China, especially in western areas.
According to the manager, branches of the Shenhua Group in Xinjiang are all in the red due to heavy coal inventory pressure, while some provinces in east and south China are suffering from severe shortages of coal.
An insider with the Shanxi Coking Coal Group said that the group was ambitiously planning to double its output capacity during the period of the 12th Five Year Plan (2011-15), but the current market environment is very unfavorable for the coal industry. The cost of acquiring small coalmines has spiraled far beyond expectations.
Therefore, the mismatch between coal supply and demand at the turn of the new year is manageable, and the market is expected to see increasing supply and decreasing demand soon, noted the insider.
But Wang Xianzheng expressed disagreement. He believed that China's coal demand would increase by 200 million to 300 million tonnes in 2011. Besides which, the government-planned construction of 10 million units of affordable housing would drive coal demand by 60 million tonnes at least. Wang believed that the coal price would remain buoyant in 2011 but would not rise much.
Source: Quotemedia, Xinhua News Agency (Edited by Li Xiaohui), istockanalyst
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Friday, 18 September 20
INDIA'S COAL-FIRED POWER OUTPUT PICKS UP AS INDUSTRIAL USE RISES - REUTERS
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Friday, 18 September 20
CHINA'S BENCHMARK POWER COAL PRICE EDGES UP - XINHUA
China’s benchmark power coal price rose slightly during the past week.
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Thursday, 17 September 20
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Asian thermal coal exporters are fighting an uphill battle even in new markets
The world’s largest thermal coal exporter is eyeing new m ...
Wednesday, 16 September 20
MARKET INSIGHT - INTERMODAL
Another active week in terms of SnP has concluded in the dry bulk market with a diversified array of transactions recorded. Despite the correction ...
Friday, 11 September 20
IMO 2020: A REVIEW OF THE TRANSITION TO VLSFOS - GARD
KNOWLEDGE TO ELEVATE
Many predictions were made in the run up to the imposition of the MARPOL 2020 sulphur cap, none of which was that the tra ...
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- CIMB Investment Bank - Malaysia
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- Vedanta Resources Plc - India
- Sical Logistics Limited - India
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- Bangladesh Power Developement Board
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- Star Paper Mills Limited - India
- Edison Trading Spa - Italy
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- VISA Power Limited - India
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- Dalmia Cement Bharat India
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Economic Council, Georgia
- Cement Manufacturers Association - India
- Eastern Coal Council - USA
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- Indogreen Group - Indonesia
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- IEA Clean Coal Centre - UK
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- Petron Corporation, Philippines
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- MS Steel International - UAE
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- Minerals Council of Australia
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- Deloitte Consulting - India
- Bhatia International Limited - India
- Posco Energy - South Korea
- Kalimantan Lumbung Energi - Indonesia
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- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Ambuja Cements Ltd - India
- Commonwealth Bank - Australia
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- Semirara Mining Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
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- Orica Australia Pty. Ltd.
- Salva Resources Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- Marubeni Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Parliament of New Zealand
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- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
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- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Altura Mining Limited, Indonesia
- TeaM Sual Corporation - Philippines
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Vijayanagar Sugar Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Wood Mackenzie - Singapore
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bulk Trading Sa - Switzerland
- Kaltim Prima Coal - Indonesia
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Siam City Cement PLC, Thailand
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Wilmar Investment Holdings
- The University of Queensland
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- Globalindo Alam Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Australian Coal Association
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- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kepco SPC Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Timah Investasi Mineral - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
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- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Barasentosa Lestari - Indonesia
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Grasim Industreis Ltd - India
- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Mercuria Energy - Indonesia
- Bhushan Steel Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- GMR Energy Limited - India
- ASAPP Information Group - India
- Madhucon Powers Ltd - India
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Renaissance Capital - South Africa
- PTC India Limited - India
- Aditya Birla Group - India
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Romanian Commodities Exchange
- Coastal Gujarat Power Limited - India
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Indonesian Coal Mining Association
- Bukit Asam (Persero) Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- IHS Mccloskey Coal Group - USA
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
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