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Monday, 27 December 10
ANALYSIS: CHINA'S COAL PRODUCTION MISMATCHED WITH DOMESTIC DEMAND
 As reported by iStock Analyst, China's coal market has been trapped in a strange cycle. Large coal production bases are facing overcapacity, while large coal consumption provinces are in short supply of power coal.
This structural contradiction between supply and demand in China's coal market has highlighted heated discussions recently.
Coal producers facing mounting pressure of excess in output capacity
China is facing severe excess of production capacity and oversupply of coal in 2010 due to the expansion of coal production and surging imports amid sluggish demand, and this situation is expected to carry on into 2011 as new coal companies begin operation.
Wang Zhanjun, director-general of the China Coal (TSXV:CKO) Industry Association, said that China's coal supply capacity has seen a remarkable increase in 2010 due to the operation of newly formed coal companies after mergers and acquisitions.
In the first 11 months of 2010, the country's leading coal producing provinces and regions including Shanxi, Inner Mongolia, Shaanxi, and Ningxia all saw more than 20 percent growth in coal output.
According to a report by the association, in the first 11 months of 2010 China's coal output surged 15.5 percent or 418 million metric tons (tonnes) year on year to 3.039 billion tonnes, while coal sales were up 13.5 percent or 390 million tonnes to 2.892 billion tonnes. Coal deliveries increased by 15.3 percent year on year to 1.827 billion tonnes during the same period.
The investment in fixed assets in the coal industry has continued to increase this year. In the first 11 months of 2010, fixed assets investment in coal mining and washing saw 22.7 percent year-on-year growth to 320.7 billion yuan.
Meanwhile, China's coal imports keep rising while exports keep declining. In January-November, China's coal exports dropped 13.5 percent to 17.58 million tonnes, and are expected to remain low in December. Total coal exports are estimated at 19 million tonnes for the whole year.
In sharp contrast to declining exports, coal imports maintained fast growth in 2010. Net imports of coal are expected to reach 145 million tonnes in 2010.
However, China's coal demand has remained sluggish this year. Affected by the measures for energy conservation and emissions reduction, electricity consumption growth of high energy-consuming industries like ferrous metals, chemicals, non-ferrous metals, and building materials has fallen back quickly since May of 2010, which in turn has cut coal consumption severely.
Coal consumption in the steel industry moved from positive growth to negative growth in 2010.
According to official statistics, China's daily crude steel output saw fast growth in the first half of 2010 but registered three months of negative growth in the third quarter, and only increased 4.8 percent in November.
Also, coal consumption in the chemicals industry has also remained sluggish this year. According to preliminary forecasts, coal consumption in the chemicals industry in 2010 will stay at the same level as in 2009, at 140 million tonnes.
The China Electricity Council predicted that electricity demand in China would not increase much in 2010 and 2011, estimating the growth at 10 percent in 2010, 14 percentage points lower than in 2009.
Therefore, coal industry is expected to face mounting oversupply pressure in 2011 since the output of majority coal enterprises would double. Meanwhile, large numbers of coalmines in Shanxi, Henan, Shaanxi, and Inner Mongolia are scheduled to begin operation in 2011, and the coal oversupply will be aggravated by the participation of more downstream firms in power generation and metallurgy, said Wang Zhanjun, head of the China Coal Industry Association.
Wang predicted that coal supply in China would increase 300 million tonnes in 2011, and China would face excess in supply of coal.
Short supply of coal at power plants
In sharp contrast with the excessive output and supply of coal, a number of power plants in parts of China are suffering from shortages of power coal.
In Guizhou province, coal output capacity is significantly less than demand. The local coal output is expected to increase by 160 million tonnes at most in 2011, which would exacerbate the tight supply. This is because the output capacity of newly formed coalmines is inadequate to make up for eliminated production capacity, and the newly formed capacity will not come into operation until the second half of 2011.
At the same time, power plants in Guizhou cannot afford coal produced outside the province because of higher coal prices.
Similar short supply of coal has also occurred in Hubei province. Coal stocks at power plants in Hubei have remained at critical level since the beginning of this year, and sometimes were even not enough for one week's consumption.
The power coal shortage is not only a headache for power plants in non-coal production areas, but also hit power plants in major coal production areas like Shanxi and Henan.
Take the Datang Taiyuan Second Thermal Power Plant for example. The plant has suffered coal shortages four times since the beginning of 2010 because its contracted coal supplier supplied only 400,000 tonnes of coal towards meeting the 1.5-million-tonne coal contract.
As of December 4, power coal stocks of Henan have slid sharply from 3.84 million tonnes at the beginning of November to 2.65 million tonnes, far below the critical level of 3.5 million tonnes.
This has led to a daily supply shortage of 700,000 tonnes. Current coal production system might be primary cause
The short supply of power coal against excess of overall output capacity in China is believed to be caused mainly by system contradictions existing in the coal industry.
Actually, China's coal industry has trapped in a strange circle. Coal demand weakens after power plants stockpile power coal, but after the stockpiling, coal stocks of coal producers are down. Therefore, the coalmines produce more coal, which eventually leads to excess of output and excessive supply of coal.
Some coal suppliers have complained that if they carry on supplying coal according to their coal contracts with the power plants at the contracted price, the coalmines would all suffer (OOTC:WLVTQ) losses while the power plants all make profits.
A senior manager of the Shenhua Group said that it is difficult to avoid the structural contradictions of disjointed coal output and demand under the current government-capped management system. The outlook of China's coal industry remains troubled for 2011, and the problem of excessive output capacity would continue to be widespread in China, especially in western areas.
According to the manager, branches of the Shenhua Group in Xinjiang are all in the red due to heavy coal inventory pressure, while some provinces in east and south China are suffering from severe shortages of coal.
An insider with the Shanxi Coking Coal Group said that the group was ambitiously planning to double its output capacity during the period of the 12th Five Year Plan (2011-15), but the current market environment is very unfavorable for the coal industry. The cost of acquiring small coalmines has spiraled far beyond expectations.
Therefore, the mismatch between coal supply and demand at the turn of the new year is manageable, and the market is expected to see increasing supply and decreasing demand soon, noted the insider.
But Wang Xianzheng expressed disagreement. He believed that China's coal demand would increase by 200 million to 300 million tonnes in 2011. Besides which, the government-planned construction of 10 million units of affordable housing would drive coal demand by 60 million tonnes at least. Wang believed that the coal price would remain buoyant in 2011 but would not rise much.
Source: Quotemedia, Xinhua News Agency (Edited by Li Xiaohui), istockanalyst
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Tuesday, 22 February 11
SUPRAMAX MARKET IS IMPROVING IN THE PACIFIC
BRS - A 10% rise in the BDI this week, mostly on the back of Panamax rates and improvements in the Supramax market in the Pacific. For the Capes, ra ...
Monday, 21 February 11
CHURCHILL MINING RECEIVES SIGNIFICANT INTEREST, PROPOSALS TO DEVELOP EAST KUTAI COAL PROJECT - PROACTIVE INVESTORS
Proactive Investors reported that, Churchill Mining has received a number of specific proposals to fund and develop its massive East Kutai coa ...
Monday, 21 February 11
ABOLISH 5% DUTY ON COAL IMPORTS: SHINDE
Indian Express reported that, with acute coal shortage of domestic coal threatening to destabilise its power generation plans, the power ministry ha ...
Saturday, 19 February 11
THE FREIGHT MARKET EXPECTED TO BE STEADY NEXT WEEK - VISTAAR
COALspot.com - The market was quite firm this week with freight rates in South east asia and India/Feast almost up by 30 pct.
However towards end ...
Thursday, 17 February 11
COAL-GEN EUROPE 2011 REAFFIRMS THE IMPORTANCE OF COAL
Press Release: The third COAL-GEN Europe conference and exhibition, kicked off on Tuesday 15 February, with leading experts, professionals and compa ...
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- Goldman Sachs - Singapore
- Jindal Steel & Power Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Kideco Jaya Agung - Indonesia
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- White Energy Company Limited
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Barasentosa Lestari - Indonesia
- Standard Chartered Bank - UAE
- Asmin Koalindo Tuhup - Indonesia
- Romanian Commodities Exchange
- CNBM International Corporation - China
- Madhucon Powers Ltd - India
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- Alfred C Toepfer International GmbH - Germany
- Indogreen Group - Indonesia
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Energy Development Corp, Philippines
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- GMR Energy Limited - India
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dalmia Cement Bharat India
- The University of Queensland
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- Larsen & Toubro Limited - India
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Sojitz Corporation - Japan
- The State Trading Corporation of India Ltd
- Port Waratah Coal Services - Australia
- Grasim Industreis Ltd - India
- Ambuja Cements Ltd - India
- Altura Mining Limited, Indonesia
- PTC India Limited - India
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Petrochimia International Co. Ltd.- Taiwan
- Rio Tinto Coal - Australia
- Sakthi Sugars Limited - India
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Latin American Coal - Colombia
- Kobexindo Tractors - Indoneisa
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Semirara Mining and Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Anglo American - United Kingdom
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Mercuria Energy - Indonesia
- Petron Corporation, Philippines
- Mjunction Services Limited - India
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Vijayanagar Sugar Pvt Ltd - India
- Videocon Industries ltd - India
- Parliament of New Zealand
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Kepco SPC Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- ICICI Bank Limited - India
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Medco Energi Mining Internasional
- Sinarmas Energy and Mining - Indonesia
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Timah Investasi Mineral - Indoneisa
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- LBH Netherlands Bv - Netherlands
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- Georgia Ports Authority, United States
- Agrawal Coal Company - India
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Directorate Of Revenue Intelligence - India
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- Chettinad Cement Corporation Ltd - India
- Indian Oil Corporation Limited
- Deloitte Consulting - India
- Malabar Cements Ltd - India
- Riau Bara Harum - Indonesia
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Semirara Mining Corp, Philippines
- Posco Energy - South Korea
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Leighton Contractors Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Indo Tambangraya Megah - Indonesia
- Makarim & Taira - Indonesia
- GAC Shipping (India) Pvt Ltd
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