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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, 10 June 10
CHARTERERS ARE NOT WILLING TO PAY THE RATES AS MARKET SLIDES
DRY BULK
Handy
Atlantic markets are quieter (Posidonia?) with less activity. Nevertheless expect some fresh enquiries f ...
Thursday, 10 June 10
R-POWER, INDONESIA'S SUGICO INK PACT TO ACQUIRE COAL MINES - ECONOMIC TIMES
Economic Times of India reported that, Anil Ambani-owned Reliance Power has signed a share-sale agreement with Indonesia’s Sugico Group to acq ...
Thursday, 10 June 10
PARAMOUNT MINING CORPORATION REPORTS KEY INDONESIAN JV AGREEMENT
Indonesia focussed Paramount Mining Corporation has reported that its Indonesian subsidiary, PT Paramindo, has concluded a Joint Venture Agreem ...
Tuesday, 08 June 10
TATA POWER LOOKING TO PICK UP STAKE IN OVERSEAS COAL MINES - ECONOMIC TIMES
Economic Times reported that, Tata Power is looking for a strategic stake purchase in coal mines of Indonesia or South Africa to fuel its upcoming 1 ...
Tuesday, 08 June 10
RUSSIA REPORTED A TENFOLD GROWTH IN COAL EXPORTS TO CHINA IN 1Q 2010 - BRS
A retreat for all the dry bulk segments this week, but especially for the Panamax and Supramax markets. The Panamax 4TC remains over US$30,000/day h ...
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- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- ICICI Bank Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Energy Exchange, India
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Lanco Infratech Ltd - India
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Oldendorff Carriers - Singapore
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Australian Coal Association
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Ministry of Mines - Canada
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- Interocean Group of Companies - India
- Wood Mackenzie - Singapore
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Medco Energi Mining Internasional
- IHS Mccloskey Coal Group - USA
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- Australian Commodity Traders Exchange
- Grasim Industreis Ltd - India
- Eastern Coal Council - USA
- TeaM Sual Corporation - Philippines
- Mjunction Services Limited - India
- Ambuja Cements Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- Semirara Mining Corp, Philippines
- Petron Corporation, Philippines
- Antam Resourcindo - Indonesia
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Energy Development Corp, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- Planning Commission, India
- Bhushan Steel Limited - India
- The State Trading Corporation of India Ltd
- ASAPP Information Group - India
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Holcim Trading Pte Ltd - Singapore
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
- Kobexindo Tractors - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Jaiprakash Power Ventures ltd
- Trasteel International SA, Italy
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- Minerals Council of Australia
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kaltim Prima Coal - Indonesia
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Karaikal Port Pvt Ltd - India
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Dalmia Cement Bharat India
- South Luzon Thermal Energy Corporation
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Therma Luzon, Inc, Philippines
- White Energy Company Limited
- Heidelberg Cement - Germany
- GMR Energy Limited - India
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
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