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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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Thursday, 20 January 11
DRY BULK MARKETS FALL SEES NO END - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Pundits indicating that the dry bulk market’s sentiment remains weak were justified, as the industry’s benchmark, the Baltic Dry Index ( ...
Wednesday, 19 January 11
DRY BULK MARKET HAS BOTTOMED OUT, AS WEATHER IN AUSTRALIA DIALS DOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has finally halted its plunge, after a devastating week of yet more losses. The industry’s benchmark, the Baltic Dry Index ...
Tuesday, 18 January 11
MINISTRY SEEKS COAL FROM INDONESIA - SUNDAY OBSERVER
Sunday Observer reported that, Ministry of Power and Energy is to explore the possibilities of importing quality coal from Indonesia.
Minister Pa ...
Tuesday, 18 January 11
DRY BULK MARKET HAS BOTTOMED OUT, AS WEATHER IN AUSTRALIA DIALS DOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has finally halted its plunge, after a devastating week of yet more losses. The industry’s benchmark, the Baltic Dry Index ...
Sunday, 16 January 11
STANCHART GLOBAL RESEARCH SEES COAL PRICE RISING ON SUPPLY DISRUPTION - BURSA MALAYSIA MARKET NEWS
Bursa Malaysia Market News reported that, Standard Chartered Global Research has upgraded its 2011 forecasts for global thermal coal prices based on ...
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- CNBM International Corporation - China
- Iligan Light & Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- The State Trading Corporation of India Ltd
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Maharashtra Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- Price Waterhouse Coopers - Russia
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Oldendorff Carriers - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Jindal Steel & Power Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- Wood Mackenzie - Singapore
- Mercator Lines Limited - India
- Bharathi Cement Corporation - India
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Global Green Power PLC Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- PTC India Limited - India
- Australian Coal Association
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- Toyota Tsusho Corporation, Japan
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Electricity Authority, New Zealand
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- Global Coal Blending Company Limited - Australia
- Maheswari Brothers Coal Limited - India
- Xindia Steels Limited - India
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- Tata Chemicals Ltd - India
- MS Steel International - UAE
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Bahari Cakrawala Sebuku - Indonesia
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Sojitz Corporation - Japan
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Goldman Sachs - Singapore
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Wilmar Investment Holdings
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Ministry of Mines - Canada
- Gujarat Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- International Coal Ventures Pvt Ltd - India
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Trasteel International SA, Italy
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Orica Mining Services - Indonesia
- Salva Resources Pvt Ltd - India
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- Posco Energy - South Korea
- GVK Power & Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Uttam Galva Steels Limited - India
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Semirara Mining and Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Planning Commission, India
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- New Zealand Coal & Carbon
- PowerSource Philippines DevCo
- Power Finance Corporation Ltd., India
- Chamber of Mines of South Africa
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- Sakthi Sugars Limited - India
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Gujarat Sidhee Cement - India
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- Videocon Industries ltd - India
- Carbofer General Trading SA - India
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Vizag Seaport Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- IEA Clean Coal Centre - UK
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Coalindo Energy - Indonesia
- Savvy Resources Ltd - HongKong
- VISA Power Limited - India
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Deloitte Consulting - India
- Leighton Contractors Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Alfred C Toepfer International GmbH - Germany
- Thai Mozambique Logistica
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Binh Thuan Hamico - Vietnam
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Baramulti Group, Indonesia
- The Treasury - Australian Government
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- Global Business Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Thiess Contractors Indonesia
- Borneo Indobara - Indonesia
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- India Bulls Power Limited - India
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
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