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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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Saturday, 15 January 11
SUPRAMAX VESSELS FIXED AROUND $ 8K FOR TRIP VIA INDONESIA TO INDIA - VISTAAR
COALspot.com - The BDI continues to drop and has touched below 1,500 points with the cape index severely affected with the index touching 1,595 poin ...
Saturday, 15 January 11
MAKE SACRIFICES TO SAVE PLN, INDONESIA GOVT BEGS MINERS - THE JAKARTA GLOBE
The Jakarta Globe reported that, Darwin Zahedi Saleh, Indonesia's minister of energy and mineral resources, on Friday appealed to local coal compan ...
Saturday, 15 January 11
RISING PRICES, GOVERNMENT DECREE LEAVE PLN AT LOGGERHEADS WITH COAL FIRMS - THE JAKARTA GLOBE
The Jakarta Globe reported that, As coal prices continue to increase, state utility Perusahaan Listrik Negara faces problems in securing enough coal ...
Thursday, 13 January 11
SURGING COAL PRICES UNDERMINE PLN'S EFFICIENCY PROGRAM - THE JAKARTA POST
The Jakarta Post reported that, The soaring global coal prices are undermining state electricity company PT PLN's pledge to improve its operational ...
Thursday, 13 January 11
SPML INFRA TO DOUBLE INDONESIA COAL MINE OUTPUT IN TWO YEARS - DNA INDIA
DNA India reported that, Kolkata-based infrastructure company SPML Infra, formerly Subhash Projects & Marketing Ltd, will in two years nearly do ...
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- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Aditya Birla Group - India
- Africa Commodities Group - South Africa
- GVK Power & Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Salva Resources Pvt Ltd - India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Agrawal Coal Company - India
- Jaiprakash Power Ventures ltd
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Directorate Of Revenue Intelligence - India
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- International Coal Ventures Pvt Ltd - India
- Eastern Coal Council - USA
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- White Energy Company Limited
- Central Electricity Authority - India
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- New Zealand Coal & Carbon
- Formosa Plastics Group - Taiwan
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Energy Development Corp, Philippines
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Holcim Trading Pte Ltd - Singapore
- Georgia Ports Authority, United States
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- Indian Oil Corporation Limited
- Anglo American - United Kingdom
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Bhoruka Overseas - Indonesia
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- Riau Bara Harum - Indonesia
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Interocean Group of Companies - India
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chettinad Cement Corporation Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- IHS Mccloskey Coal Group - USA
- Globalindo Alam Lestari - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Leighton Contractors Pty Ltd - Australia
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- OPG Power Generation Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- India Bulls Power Limited - India
- Latin American Coal - Colombia
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- ASAPP Information Group - India
- San Jose City I Power Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Makarim & Taira - Indonesia
- Grasim Industreis Ltd - India
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Maharashtra Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- The University of Queensland
- Mercator Lines Limited - India
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Makmur.PT - Indonesia
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Thiess Contractors Indonesia
- Manunggal Multi Energi - Indonesia
- Singapore Mercantile Exchange
- European Bulk Services B.V. - Netherlands
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Heidelberg Cement - Germany
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Wood Mackenzie - Singapore
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Independent Power Producers Association of India
- Xindia Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Binh Thuan Hamico - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Vedanta Resources Plc - India
- Posco Energy - South Korea
- Romanian Commodities Exchange
- Trasteel International SA, Italy
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