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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, 22 April 10
INDONESIAN COAL PRICE REFERENCE FOR MARCH 2010 - US$ 86.64/T
COALspot.com: The directorate general of mineral, coal and geothermal of Indonesia has begun publishing a monthly coal price reference (HBA) to be use ...
Thursday, 22 April 10
NEED TO IMPORT 82 MT COAL IN FISCAL - INDIA COAL MIN
Indian Express reported that, anxious to bridge the ever-widening gap between the rising demand for coal and its inadequate supply, the Coal Ministr ...
Thursday, 22 April 10
DRY CARGO DEMAND EXPECTED TO INCREASE, FAVORING HIGHER FREIGHT RATES
Increased dry bulk cargo demand is expected to become the norm in the coming weeks and months, according to analysts, which in turn should sustain f ...
Thursday, 22 April 10
INDIA'S BORL SEEKS TO BUY INDONESIAS LOW - SULFUR COAL
COALspot.com: Bharat Oman Refineries Ltd, a joint venture company (promoted by Bharat Petroleum Corporation Ltd, India and Oman Oil Company Lt ...
Wednesday, 21 April 10
INDONESIA SHIPPED 13.24 PERCENT MORE COAL IN MARCH THAN A MONTH EARLIER
COALspot.com: Indonesia, the world largest coal exporter, shipped 27,615,191 MT of coal in March 2010, compare to 24.38 million tons in January and ...
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- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- MS Steel International - UAE
- Therma Luzon, Inc, Philippines
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Indo Tambangraya Megah - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Larsen & Toubro Limited - India
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Rio Tinto Coal - Australia
- Maharashtra Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Tamil Nadu electricity Board
- SMC Global Power, Philippines
- Leighton Contractors Pty Ltd - Australia
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Petron Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Medco Energi Mining Internasional
- Kohat Cement Company Ltd. - Pakistan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Mintek Dendrill Indonesia
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Central Java Power - Indonesia
- Simpson Spence & Young - Indonesia
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Timah Investasi Mineral - Indoneisa
- The Treasury - Australian Government
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- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- Wilmar Investment Holdings
- Merrill Lynch Commodities Europe
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- Minerals Council of Australia
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Mercuria Energy - Indonesia
- Semirara Mining Corp, Philippines
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Dalmia Cement Bharat India
- The University of Queensland
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Parliament of New Zealand
- Directorate General of MIneral and Coal - Indonesia
- Bhatia International Limited - India
- Barasentosa Lestari - Indonesia
- PTC India Limited - India
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Aboitiz Power Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Bharathi Cement Corporation - India
- Edison Trading Spa - Italy
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Economic Council, Georgia
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Planning Commission, India
- Kapuas Tunggal Persada - Indonesia
- Thai Mozambique Logistica
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- GVK Power & Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- Australian Coal Association
- ICICI Bank Limited - India
- LBH Netherlands Bv - Netherlands
- Ministry of Transport, Egypt
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Bhushan Steel Limited - India
- Maheswari Brothers Coal Limited - India
- Vizag Seaport Private Limited - India
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- Intertek Mineral Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Goldman Sachs - Singapore
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
- Interocean Group of Companies - India
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- Mercator Lines Limited - India
- Jindal Steel & Power Ltd - India
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Electricity Authority, New Zealand
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- Manunggal Multi Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bukit Baiduri Energy - Indonesia
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Alfred C Toepfer International GmbH - Germany
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement PLC, Thailand
- Sakthi Sugars Limited - India
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- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- Straits Asia Resources Limited - Singapore
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