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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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Friday, 04 February 11
PERTAMINA DENIES KAREN AGUSTIAWAN RESIGNS FROM PERTAMINA
COALspot.com - The President Director of PT Pertamina, Karen Agustiawan reportedly will replace Darwin Saleh as Minister of Energy and Mineral Resou ...
Friday, 04 February 11
ADARO ENERGY FY10 COAL SALES UP 6 PERCENT TO 43.84 MILLION
As reported by insider stories, Indonesian coal miners PT Adaro Energy Tbk has produced 42.20 million tons of coal in 2010, a 4 percent increase com ...
Thursday, 03 February 11
MERCATOR LINES TO INVEST RS 200-250 CRORE ON COAL MINE IN INDONESIA - ECONOMIC TIMES
Economic Times reported that, Mercator Lines, the HK Mittal-controlled shipping-to-mines major, will invest about 200-250 crore (US$ 43.825 - 54.781 ...
Thursday, 03 February 11
DRY BULK MARKET LOOKS SET TO BOTTOM OUT NIKOS - ROUSSANOGLOU, HELLENIC SHIPPING
With the dry bulk market having lost more than 72% of its value in the last month or so and having retreated to a 2-year low, it seems that the bott ...
Wednesday, 02 February 11
INDONESIA MAY MISS COAL EXPORT TARGET IN 2011
COALspot.com - Indonesian Trade ministry has instructed independent surveyors temporarily not to issue pre-shipment survey report (LS) to the compan ...
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- Thai Mozambique Logistica
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- Electricity Authority, New Zealand
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- Eastern Energy - Thailand
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- International Coal Ventures Pvt Ltd - India
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- Parliament of New Zealand
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- Energy Development Corp, Philippines
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- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Australian Coal Association
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- Romanian Commodities Exchange
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- Ceylon Electricity Board - Sri Lanka
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- Trasteel International SA, Italy
- Star Paper Mills Limited - India
- Dalmia Cement Bharat India
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
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- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Renaissance Capital - South Africa
- White Energy Company Limited
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Goldman Sachs - Singapore
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- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- Medco Energi Mining Internasional
- Sojitz Corporation - Japan
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- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
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- Kapuas Tunggal Persada - Indonesia
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
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- Ministry of Transport, Egypt
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- Sindya Power Generating Company Private Ltd
- Therma Luzon, Inc, Philippines
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- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Port Waratah Coal Services - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Ministry of Finance - Indonesia
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- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Barasentosa Lestari - Indonesia
- Commonwealth Bank - Australia
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- Directorate General of MIneral and Coal - Indonesia
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- Indonesian Coal Mining Association
- Wood Mackenzie - Singapore
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- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- LBH Netherlands Bv - Netherlands
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
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- Latin American Coal - Colombia
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- Planning Commission, India
- Bharathi Cement Corporation - India
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Bulk Trading Sa - Switzerland
- Kobexindo Tractors - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- Grasim Industreis Ltd - India
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coal and Oil Company - UAE
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- Bhushan Steel Limited - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Gujarat Mineral Development Corp Ltd - India
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- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Africa Commodities Group - South Africa
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- Metalloyd Limited - United Kingdom
- IEA Clean Coal Centre - UK
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- Indo Tambangraya Megah - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Kaltim Prima Coal - Indonesia
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- Heidelberg Cement - Germany
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