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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, 15 June 10
INDONESIA'S COAL EXPORTS FELL TO 18.52 - MILLION TONS IN MAY
COALspot.com: Indonesia, the world largest coal exporter, shipped 18,529,695 of coal in May 2010. May coal exports dropped by 20.61 percent co ...
Monday, 14 June 10
S. AFRICA BOOSTS COAL SALES TO INDIA 12%, TRADER SAYS
Bloomberg reported that, South Africa’s Richards Bay, the world’s second-biggest coal export harbor, boosted sales to India by 12 percen ...
Sunday, 13 June 10
THE FUTURES FOR THREE YEARS (2010-2012) WAS AT AROUND CAPE/US$ 29000 PER DAY & PANAMAX/US$ 20500 PER DAY - VISTAAR
COALspot.com: The market continue to soften in all sectors and the most affected was cape size which was down by 16.32 pct. The BDI was down by 14.4 ...
Saturday, 12 June 10
BALTIC EXCHANGE ESTABLISHES ASIA-PACIFIC OFFICE
The London-based Baltic Exchange has today announced it is setting up an Asia-Pacific Representative Office in Singapore, to ensure closer contact w ...
Saturday, 12 June 10
NALCO TO ROPE IN PARTNERS FOR INDONESIA PROJECT
Sify reported that, the public sector National Aluminium Company (Nalco) is set to finalise the terms of its joint venture (JV) agreement with two f ...
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- PowerSource Philippines DevCo
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jorong Barutama Greston.PT - Indonesia
- India Bulls Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Kapuas Tunggal Persada - Indonesia
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- Chamber of Mines of South Africa
- ICICI Bank Limited - India
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Heidelberg Cement - Germany
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- Economic Council, Georgia
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement PLC, Thailand
- Global Business Power Corporation, Philippines
- Posco Energy - South Korea
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Tata Chemicals Ltd - India
- Parry Sugars Refinery, India
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- PTC India Limited - India
- Central Java Power - Indonesia
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Kideco Jaya Agung - Indonesia
- Bangladesh Power Developement Board
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Aditya Birla Group - India
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Intertek Mineral Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Romanian Commodities Exchange
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Salva Resources Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Parliament of New Zealand
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Interocean Group of Companies - India
- Makarim & Taira - Indonesia
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Ministry of Mines - Canada
- Directorate Of Revenue Intelligence - India
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Lanco Infratech Ltd - India
- CNBM International Corporation - China
- Globalindo Alam Lestari - Indonesia
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- Dalmia Cement Bharat India
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- Sindya Power Generating Company Private Ltd
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- ASAPP Information Group - India
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Bulk Trading Sa - Switzerland
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- Australian Commodity Traders Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- OPG Power Generation Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- Manunggal Multi Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bhushan Steel Limited - India
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- McConnell Dowell - Australia
- Kumho Petrochemical, South Korea
- Formosa Plastics Group - Taiwan
- Energy Link Ltd, New Zealand
- The University of Queensland
- Miang Besar Coal Terminal - Indonesia
- Singapore Mercantile Exchange
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Mercator Lines Limited - India
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- White Energy Company Limited
- Altura Mining Limited, Indonesia
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- Rio Tinto Coal - Australia
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
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