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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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Thursday, 17 June 10
INDONESIAN COAL PRICE REFERENCE FOR JUNE IS US$ 97.22/TON UP 5.59 PERCENT
COALspot.com: The directorate general of mineral, coal and geothermal of Indonesia has been publishing a monthly coal price reference (HBA) to be us ...
Thursday, 17 June 10
COAL EXPLORATION & DEVELOPMENTS HOTPOTS CONFERENCE
Press Release: The Coal Exploration and Developments Hotspots conference will bring together a panel of more than 20 of the world’s lead ...
Thursday, 17 June 10
AUSTRALIA'S LEIGHTON WINS $1.3 BILLION OF NEW WORK - THE JAKARTA POST
Australian construction and contract mining group Leighton Holdings Ltd. said Thursday it has won 1.5 billion Australian dollars ($1.3 billion) of n ...
Wednesday, 16 June 10
INDONESIAS STATE OWNED ELECTRICITY COMPANY WILL CONSUME 95.30 MILLION TONS OF COAL IN 2014
COALspot.com: Indonesia's state owned electricity company forecasted its coal requirement in 2014 would be around 95 million tons. ...
Wednesday, 16 June 10
MADHYA PRADESH GOVT IMPORT 50K METRIC TONNES OF COAL FROM INDONESIA - DNA INDIA
DNA India reported that, the Madhya Pradesh government has imported 50,000 metric tonnes of coal from Indonesia to deal with its shortage which is a ...
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- Meralco Power Generation, Philippines
- Global Coal Blending Company Limited - Australia
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Heidelberg Cement - Germany
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- Mercator Lines Limited - India
- Sical Logistics Limited - India
- GVK Power & Infra Limited - India
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Goldman Sachs - Singapore
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- White Energy Company Limited
- Edison Trading Spa - Italy
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Essar Steel Hazira Ltd - India
- Dalmia Cement Bharat India
- GAC Shipping (India) Pvt Ltd
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- Cement Manufacturers Association - India
- Cigading International Bulk Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- San Jose City I Power Corp, Philippines
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Formosa Plastics Group - Taiwan
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Pendopo Energi Batubara - Indonesia
- Madhucon Powers Ltd - India
- Thai Mozambique Logistica
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Commonwealth Bank - Australia
- Simpson Spence & Young - Indonesia
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Singapore Mercantile Exchange
- Sojitz Corporation - Japan
- PetroVietnam Power Coal Import and Supply Company
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
- Energy Development Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- Bharathi Cement Corporation - India
- Indonesian Coal Mining Association
- Petrochimia International Co. Ltd.- Taiwan
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Kumho Petrochemical, South Korea
- Gujarat Sidhee Cement - India
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- Star Paper Mills Limited - India
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- Xindia Steels Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Interocean Group of Companies - India
- Sindya Power Generating Company Private Ltd
- PTC India Limited - India
- Parry Sugars Refinery, India
- Bukit Asam (Persero) Tbk - Indonesia
- Chamber of Mines of South Africa
- Karbindo Abesyapradhi - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- Alfred C Toepfer International GmbH - Germany
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Aditya Birla Group - India
- Leighton Contractors Pty Ltd - Australia
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Coastal Gujarat Power Limited - India
- Australian Commodity Traders Exchange
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Africa Commodities Group - South Africa
- Makarim & Taira - Indonesia
- Australian Coal Association
- Videocon Industries ltd - India
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- Samtan Co., Ltd - South Korea
- GN Power Mariveles Coal Plant, Philippines
- International Coal Ventures Pvt Ltd - India
- Indian Energy Exchange, India
- Semirara Mining and Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Attock Cement Pakistan Limited
- Indika Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- Kideco Jaya Agung - Indonesia
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
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