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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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Wednesday, 26 January 11
DRY BULK MARKET TAKES YET ANOTHER NOSEDIVE, CAPESIZES LOOK RATHER UNATTRACTIVE AT THE MOMENT - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The downturn of the dry bulk market sees no boundariers, disproving even those who thought that at least for the capesize market, the worst had pass ...
Tuesday, 25 January 11
DRY BULK RATES CONTINUED TO TUMBLE LAST WEEK - BRS
With weather-related problems affecting the short-term outlook, and new building deliveries the longer-term picture, dry bulk rates continued to tum ...
Tuesday, 25 January 11
R-POWER TO INVEST $5BN IN INDONESIA - THE TIMES OF INDIA
The Times of India reported that, In what is being seen as one of the largest foreign investments in Indonesia, Reliance Power will infuse $5 billio ...
Monday, 24 January 11
GOVT PROMISES COAL FOR PLN DESPITE PRICE SPIKES - THE JAKARTA POST
The Jakarta Post reported that, the government says state electricity company PT PLN will receive enough coal to fire its power plants, despite pric ...
Monday, 24 January 11
DRY BULK MARKETS DOWNTURN SEES NO RELIEF - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has kept falling for yet another week, with the industry’s benchmark, the Baltic Dry Index (BDI) losing an additional 4.79 ...
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- Ceylon Electricity Board - Sri Lanka
- Indian Energy Exchange, India
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Sical Logistics Limited - India
- ASAPP Information Group - India
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Parliament of New Zealand
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Sree Jayajothi Cements Limited - India
- Bukit Makmur.PT - Indonesia
- PNOC Exploration Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Thai Mozambique Logistica
- Bahari Cakrawala Sebuku - Indonesia
- Banpu Public Company Limited - Thailand
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- New Zealand Coal & Carbon
- Attock Cement Pakistan Limited
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Aditya Birla Group - India
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- Cigading International Bulk Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- Iligan Light & Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Kumho Petrochemical, South Korea
- Ministry of Mines - Canada
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Savvy Resources Ltd - HongKong
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Indogreen Group - Indonesia
- Port Waratah Coal Services - Australia
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- VISA Power Limited - India
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Lanco Infratech Ltd - India
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Petron Corporation, Philippines
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- Mintek Dendrill Indonesia
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Riau Bara Harum - Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Jindal Steel & Power Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- London Commodity Brokers - England
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Latin American Coal - Colombia
- PTC India Limited - India
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Videocon Industries ltd - India
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Central Java Power - Indonesia
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- The Treasury - Australian Government
- Commonwealth Bank - Australia
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- Planning Commission, India
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