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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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Friday, 02 July 10
PROPOSED MINERAL RESOURCE RENT TAX - PRESS RELEASE (2)
Press Release: BHP Billiton, Rio Tinto and Xstrata said today that they are encouraged by the Federal Government’s announcement that it propos ...
Friday, 02 July 10
MINERALS RESOURCE TAXATION IN AUSTRALIA - PRESS RELEASE
Press Release : Rio Tinto acknowledges the Australian Government’s announcement that the Resource Super Profits Tax (RSPT) proposal will be re ...
Thursday, 01 July 10
TATA POWER TO RAISE US$300 MILLION THROUGH ITS COAL SPVS TO FUND ADDITIONAL ACQUISITIONS AND / OR REDUCE OUTSTANDING DEBT
Stock Markets Review reported that, Tata Power, India’s largest private power player has signed an agreement to raise US$300 million in Bhira ...
Thursday, 01 July 10
HELLENIC SHIPPING NEWS POLL: THE BDI WILL STAY ABOVE 3,000 POINTS IN THE SECOND HALF OF 2010
When Hellenic Shipping News Worldwide prepared June’s poll asking readers about where do they think that the Baltic Dry Index (BDI) will range ...
Thursday, 01 July 10
PANAMAX MARKETS CONTINUE TO DROP IN ALL BASINS - FEARNLEYS
Handy
Atlantic rates continue to slide with little activity. Supras open in USG get low 30´s to Med and mid 40´s to FEast. Hmax/Supra ...
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- Globalindo Alam Lestari - Indonesia
- VISA Power Limited - India
- TeaM Sual Corporation - Philippines
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- Thiess Contractors Indonesia
- SMG Consultants - Indonesia
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bhoruka Overseas - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Marubeni Corporation - India
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- Holcim Trading Pte Ltd - Singapore
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Energy Link Ltd, New Zealand
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- Bayan Resources Tbk. - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- Planning Commission, India
- Toyota Tsusho Corporation, Japan
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Malabar Cements Ltd - India
- PTC India Limited - India
- Kobexindo Tractors - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Simpson Spence & Young - Indonesia
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Kideco Jaya Agung - Indonesia
- Port Waratah Coal Services - Australia
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Petron Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Ambuja Cements Ltd - India
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- CIMB Investment Bank - Malaysia
- Global Business Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- Eastern Coal Council - USA
- Sarangani Energy Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Sical Logistics Limited - India
- Dalmia Cement Bharat India
- White Energy Company Limited
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- India Bulls Power Limited - India
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- Indian Energy Exchange, India
- GAC Shipping (India) Pvt Ltd
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- MS Steel International - UAE
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Billiton Holdings Pty Ltd - Australia
- Bhatia International Limited - India
- ICICI Bank Limited - India
- ASAPP Information Group - India
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Indogreen Group - Indonesia
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- Altura Mining Limited, Indonesia
- Independent Power Producers Association of India
- Oldendorff Carriers - Singapore
- Merrill Lynch Commodities Europe
- Mjunction Services Limited - India
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Metalloyd Limited - United Kingdom
- Baramulti Group, Indonesia
- Aboitiz Power Corporation - Philippines
- Anglo American - United Kingdom
- Singapore Mercantile Exchange
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- IHS Mccloskey Coal Group - USA
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Minerals Council of Australia
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- SMC Global Power, Philippines
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- Timah Investasi Mineral - Indoneisa
- Borneo Indobara - Indonesia
- San Jose City I Power Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Cement Manufacturers Association - India
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Bulk Trading Sa - Switzerland
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