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Wednesday, 09 June 10
INDIA, CHINA TO PROP UP THERMAL COAL DEMAND - COMMODITY ONLINE
 Commodity Online : Weakness in thermal coal demand in OECD will continue to be offset by growth in demand in India and China. Therefore, the seaborne thermal coal will continue to be in tight supply over the next few years, according to an analysis by Bank of America-Merrill Lynch.
The analysis points out that supply issues are affecting the demand and pricing of thermal coal. South Africa’s thermal exports remain constrained by rail issues near term, with some relief possible in 2011. Australia’s thermal coal exports are also expected to improve in 2011, with additional port capacity being commissioned, but rail issues are likely to continue and hinder rapid export growth. Indonesian export growth should slow, as domestic demand builds. Over the last five years, Indonesian exports increased by a staggering 80%, over the next five years we only expected a further 20% increase.
India's domestic coal supplies and transportation systems are also struggling to keep pace with surging demand, and imports will fill the gap. Longer term, India’s Ultra Mega Power stations are largely focused on imported coal.
BofAML doesn't expect European demand to fall any further which coupled with rising China imports could keep the thermal coal market tight. The support for thermal coal comes from seasonal strength, low inventories, and continued transportation bottlenecks. Longer term strong demand is expected from the ongoing coal-fired power station build-out, as well
as continued cost inflation pressures on the domestic coal industry
Weak demand in the Atlantic Basin combined with low freight rates have seen South African, US and Colombian coals increasingly shipped to new markets such as India, Pakistan and China. As such, BofAML believes Asian coal prices will be the marginal price setter for Atlantic coals and prices will be determined by the mix of Asian coal market prices and freight rates.
South Africa: Strike over, but supply issues are not
Rail volume remains poor despite resolution of the recent strike. Port stocks remain low and, as such, export volumes could be at further downside risk.
South Africa’s export issues are clearly constrained by their rail capacity for the next few years (Richard Bay phase five will take capacity to 91mtpa by year end). Rail capacity is set to increase in 2011 from around 66mtpa to 80mtpa with the addition of 100 new diesel electric loco’s to be delivered in early 2011. However, any commissioning delays or additional labour disputes could take a heavy toll on South Africa’s planned export growth.
South Africa’s domestic demand
Eskom, South Africa’s largest utility, is opposing exports of lower grade coals out of Richards Bay. A lower-grade thermal product called RB3 (5,600kCal) has been developed for new markets, such as India, that are capable of consuming such coal.
Australian exports
Australian thermal coal exports have been subdued in recent months with Newcastle operating near full capacity. However, April exports from Newcastle have improved, suggesting
some improvement will follow in total (export data yet to be released). Export volumes for 2011 are expected to improve as new capacity is commissioned in the form of stage 1 NCIG and continued expansion of the Kooragang Island coal terminal. Rail issues may continue to hinder export growth.
Coal projects to underpin the additional capacity additions at Newcastle are significant. Additional coal will be supplied by a number of new expansions and operations in 2011, such as Moolarben (6.2mtpa by 2011) and Narrabri (5mtpa by 2013).
China’s demand for Australian seaborne coal has dissipated this year, switching to other coal suppliers such as Indonesia, South Africa and even Colombia . We see this as positive with Newcastle prices holding firm despite the lacklustre demand from China.
Australia’s export plans
The development of Australia’s considerable thermal coal resources is progressing, but infrastructure remains the current impediment to export growth. While port constraint issues are being slowly resolved, rail developments are ongoing and remain a critical part of mine development progress.
In NSW, the Port Waratah Coal Services (PWCS) shipped 93mtpa in 2009, with a recent expansion to 113mtpa in 2010 (however YTD exports are yet to show much improvement). The next stage to 135mtpa has been approved. Beyond this there are plans for an additional 50-60mtpa. Separately, the NCIG could ultimately add a further 66mtpa.
Goonyella Abbott Point project (formerly the northern missing link) has seen contracts exchanged recently and construction commenced, with take or pay commitments from Anglo and Aquila. BofAML believes first coal is due down the track in 2012. Abbot Point already has 50mtpa export capacity and as such increased rail capacity here should have a great impact on exports.
Indonesian exports: Booming, slowdown coming
Indonesian exports should continue to grow, albeit at much lower rates than historical levels. During the last five years, exports have increased 80%, and over the next five years we forecast exports to increase only 20%.
This growth will be dominated by low rank coal. Driving this is the low pricing of Indonesian low rank coal and low production costs. The negative aspects of such coal are high moisture, low energy content, potential spontaneous combustion issues and higher shipping costs (due to higher moisture levels). BofAML sees China and India as the main markets for this coal given new power stations’ ability to utilise such coal types .
In late 2009, the government announced a plan to cap coal exports at 150mtpa (2008 exports were 200mtpa), but this did not account for the around 50mtpa in illegal exports. However, we see this as unlikely to be enforced with coal production growth to outstrip domestic demand. Domestic demand will account for about 40mt in 2010 potentially increasing to approximately 80mt by 2013, assuming power station building is not delayed.
Indonesia’s exports increased sharply YTD. Exports reached 82.47mt in the first four months of the year (247mt annualised vs 201mt exports in 2009). Driving this growth were sharply higher volumes to China (26% of volumes) and India (15% of volumes). BofAML stated that much of the growth in export volumes occurred in low caloric value coals, given China and Indian markets dominate buying in low rank coals.
Mongolia: Exports heating up
Given Mongolia exports are land based, they do not feature in our seaborne supply demand model. However, we believe they will have an important role to play in global coal trade. Most Mongolia coal (125bt resources) is in the south and bordering China. Mongolia exported 8.5mt in thermal and semi soft coal in 2008. This is forecast to grow rapidly over the next five years, potentially as high as 60mt.
However, several issues are critical. Rail infrastructure is lacking in Mongolia and the current system is based on Russian wide gauge (vs China standard gauge). The debate over which rail gauge to use is currently before parliament. Mongolia hart 12: Indonesian thermal coal exports (Mt)… slowing to 4% pa growth from 12%pa growth will be a key supply source for China.
Despite this new supply source, BofAML believes China will continue to import significant seaborne coal volume as the competitive dynamics of seaborne coal improve versus domestic coal over time.
Vietnam: Stable exports for now
We believe Vietnam’s exports will be largely stable over our forecast time period. However, longer term, Vietnam’s exports could slow as domestic electricity generation ramps up, outpacing domestic supply in the outer years of the forecasts. Longer term, Vietnam could import a significant amount of Indonesian thermal coal (5-6mt), yet delays to power station construction have seen much of this potential demand pushed back after 2015.
Demand: Macro headwinds abound
The rapid surge in funding costs for sovereign nations, financial institutions and corporations has once again raised concerns about systemic risk. The iTraxx Europe 5Y CDS index is now 60bp higher than its low point for the year, suggesting significantly higher borrowing costs for European corporates. Implied volatilities in cyclical asset classes such as equities and commodities have also spiked in the last month. Investor flows are largely reflecting a flight to safety, and leverage is being reduced across various financial markets. The combination of higher sovereign risk, a falling euro and the financial regulation bill recently passed in the US Senate should continue to provide support for US dollardenominated safe haven assets, such as gold and US Treasuries.
Judging by the latest available data, the global industrial production cycle is in full swing. Clearly, it is still too early to determine the exact impact that the European financial crisis will have on the real economy. In the Eurozone, the manufacturing PMI decelerated slightly in April, but still implied strong growth ahead. However, we find it increasingly likely that global economic activity will start to decelerate.
Europe suffers from a big North-South competitiveness divide, an indebted consumer and overstretched government finances, all of which could put GDP growth on a lower trend path over the coming quarters. Moreover, it is no secret that European economies are closely interdependent when it comes to trade, so a crisis in Southern Europe can have a big impact on Northern European economies through the export channel. In addition to the obvious trade linkages, European countries hold each other’s debt, highlighting why contagion across the Eurozone spread at such a rapid pace during the past few weeks China will import substantial volumes of seaborne coal in 2010 and 2011.
European coal demand: Bottomed out
While the macroeconomic environment is deteriorating, BofAML does not believe European coal imports will slide further. EEC thermal coal imports for March at 8mt were the lowest level seen over the past five years.
Germany accounts for around a third of EEC imported coal volumes. Germany’s demand to remain robust with planned commissioning of about 20MW of coal fired power stations over the next five years. The coal feed for these power stations will need to be imported. Part of the coal-fired power station roll out is replacement of existing older facilities, and part is replacement of ageing nuclear plants. The UK accounts for another third of EEC imported coal volumes.
Ten power stations are facing closure after 2012, following the emissions trading scheme introduced in 2005. Despite this, we expect imported thermal coal demand to improve as domestic coal supplies are depleted. France and Spain will see continued import coal demand declines as switching to nuclear and gas power, respectively, continues.
Japan – A slow switch away from coal
Traditionally the world’s largest seaborne coal importer, Japan’s economy is rebounding. Coal power consumption is improving and inventories are at low levels.
More broadly JPUs are continuing the diversification process away from coal-fired power toward nuclear. Additionally, programs are in place to improve the thermal efficiency of existing and new coal plants.
India’s Imports - Progression
India’s economic growth is robust and appears relatively well insulated from external shocks. Industrial production growth has accelerated sharply and increasing power production will be required to underpin growth.
BofAML believes India’s rapidly rising import demand for thermal coal will continue. Recent import demand has been supported by strong demand and domestic coal supply issues. BofAML said that that ~30 coal fired power plants are now at critical stock levels of less than 7 days due to an inability to secure coal supplies. BofAML said that rail (lack of rail dumpers) continues to be a constraint on domestic coal supplies in India with imported coals from South Africa, Indonesia and Australia filling the gap.
Source:Commodity Online
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Tuesday, 06 July 10
KEPCO, POSCO BUY AUSTRALIAN COAL MINES - CHOSUN
Chosun reported that, Electricity monopoly KEPCO and steelmaker POSCO have both bought coal mines in Australia.
KEPCO signed a 400 million Austra ...
Tuesday, 06 July 10
SHENHUA GROUPS 2013 PROFIT MAY EXCEED $15 BILLION - BUSINESS WEEK
Business Week reported that, Shenhua Group Corp., China’s biggest coal producer, expects profit to exceed 100 billion yuan ($15 billion) by 20 ...
Saturday, 03 July 10
THE FREIGHT MARKET CONTINUES TO BE UNCERTAIN - CAPT. REDDY
COALspot.com: The market continues to soften and the most affect sector was Panamax which was down by almost 20 pct and closed at 2447 points. The C ...
Friday, 02 July 10
SARDA ENERGY TO ACQUIRE COAL MINES IN INDONESIA
India Info Line reported that, Sarda Energy & Minerals Ltd has announced that the authorities in Indonesia have granted the Environment Cle ...
Friday, 02 July 10
DRY BULK MARKET ON A FREEFALL, REACHING ITS LOWEST IN 9 MONTHS
The Baltic Dry Index is off to break more negative records this week, as the dry bulk shipping industry’s main benchmark has failed to find ro ...
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- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Kumho Petrochemical, South Korea
- Oldendorff Carriers - Singapore
- Jindal Steel & Power Ltd - India
- Directorate Of Revenue Intelligence - India
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Binh Thuan Hamico - Vietnam
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Electricity Authority, New Zealand
- Therma Luzon, Inc, Philippines
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Indonesian Coal Mining Association
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Uttam Galva Steels Limited - India
- Larsen & Toubro Limited - India
- Leighton Contractors Pty Ltd - Australia
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- Karaikal Port Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Interocean Group of Companies - India
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Finance - Indonesia
- Energy Link Ltd, New Zealand
- Agrawal Coal Company - India
- Rio Tinto Coal - Australia
- Parry Sugars Refinery, India
- Mercuria Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
- Central Java Power - Indonesia
- Kideco Jaya Agung - Indonesia
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- Global Coal Blending Company Limited - Australia
- TeaM Sual Corporation - Philippines
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- AsiaOL BioFuels Corp., Philippines
- IEA Clean Coal Centre - UK
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Romanian Commodities Exchange
- White Energy Company Limited
- Medco Energi Mining Internasional
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Coalindo Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Mining Services - Indonesia
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Bhushan Steel Limited - India
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Bharathi Cement Corporation - India
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Indo Tambangraya Megah - Indonesia
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Planning Commission, India
- Parliament of New Zealand
- Madhucon Powers Ltd - India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- PTC India Limited - India
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Videocon Industries ltd - India
- Kobexindo Tractors - Indoneisa
- Commonwealth Bank - Australia
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Sojitz Corporation - Japan
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- Tamil Nadu electricity Board
- Wood Mackenzie - Singapore
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Bukit Baiduri Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Essar Steel Hazira Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Antam Resourcindo - Indonesia
- Coastal Gujarat Power Limited - India
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Bangladesh Power Developement Board
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Trasteel International SA, Italy
- SMG Consultants - Indonesia
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- Petron Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
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