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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, 13 January 11
DRY BULK RATES HIT NEW MULTI-MONTH LOWS ON AUSTRALIAS FLOODS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Floods in Australia’s Queensland has seriously disrupted coal shipments and together with a flood of vessels has pushed freight rates for dry ...
Wednesday, 12 January 11
BULKER DELIVERIES WEIGHING IN ON FREIGHT RATES KEEPING SENTIMENT ON A NEGATIVE MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
A flurry of new buildings still hitting the water has caught up for good with the freight market, with capesizes unable to weather the storm. With r ...
Tuesday, 11 January 11
SUPRAMAX TRIP VIA INDONESIA TO INDIA US$ 8,000 PER DAY
Despite continued growth in the bulk trades, the delivery of new vessels is beginning to take its toll. The BDI continued its decline, finishing las ...
Tuesday, 11 January 11
DRY BULK MARKET REACHES NEW LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market’s benchmark index, the Baltic Dry Index (BDI) lost further ground in the beginning of the week, following the trend of the ...
Monday, 10 January 11
MINING INVESTMENT TARGET TOO LOW - TEMPO INTERACTIVE
TEMPO Interactive reported that, the Indonesian Mining Association’s executive director, Priyo Pribadi, believes the government’s invest ...
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- Karbindo Abesyapradhi - Indoneisa
- White Energy Company Limited
- Central Electricity Authority - India
- London Commodity Brokers - England
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Intertek Mineral Services - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- PTC India Limited - India
- LBH Netherlands Bv - Netherlands
- Bayan Resources Tbk. - Indonesia
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Edison Trading Spa - Italy
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- Manunggal Multi Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Essar Steel Hazira Ltd - India
- Rio Tinto Coal - Australia
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Bhoruka Overseas - Indonesia
- OPG Power Generation Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Ministry of Transport, Egypt
- Bharathi Cement Corporation - India
- Parliament of New Zealand
- Ministry of Mines - Canada
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Global Green Power PLC Corporation, Philippines
- The University of Queensland
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining Corp, Philippines
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Makarim & Taira - Indonesia
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- IEA Clean Coal Centre - UK
- AsiaOL BioFuels Corp., Philippines
- Baramulti Group, Indonesia
- Global Coal Blending Company Limited - Australia
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Wood Mackenzie - Singapore
- Eastern Energy - Thailand
- South Luzon Thermal Energy Corporation
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Ambuja Cements Ltd - India
- Cement Manufacturers Association - India
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Orica Australia Pty. Ltd.
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Indika Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- VISA Power Limited - India
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Bahari Cakrawala Sebuku - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Karaikal Port Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Samtan Co., Ltd - South Korea
- Posco Energy - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- CNBM International Corporation - China
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- MS Steel International - UAE
- Africa Commodities Group - South Africa
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Ministry of Finance - Indonesia
- Standard Chartered Bank - UAE
- Videocon Industries ltd - India
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- Anglo American - United Kingdom
- Global Business Power Corporation, Philippines
- McConnell Dowell - Australia
- Thiess Contractors Indonesia
- Metalloyd Limited - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Antam Resourcindo - Indonesia
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Binh Thuan Hamico - Vietnam
- Madhucon Powers Ltd - India
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
- Energy Development Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- Tata Chemicals Ltd - India
- ASAPP Information Group - India
- Sarangani Energy Corporation, Philippines
- Larsen & Toubro Limited - India
- Kartika Selabumi Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Romanian Commodities Exchange
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