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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, 08 January 11
DIFFICULT YEAR FOR SHIPPING - TRANSPORT WEEKLY
Transport Weekly reported that, Shipping Corporation of India (SCI) chairman Sabyasachi Hajara says 2011 will be a difficult year because an excess ...
Saturday, 08 January 11
AUSTRALIAN FLOODS MAY BOOST RIS COAL SALES - THE JAKARTA POST
The Jakarta Post reported that, Floods inundating Queensland have disrupted Australian coal production, and in turn may offer opportunities for Indo ...
Saturday, 08 January 11
GOVERNMENT REMAINS CAUTIOUS OVER FOREIGN INVESTMENT IN MINING SECTOR - THE JAKARTA GLOBE
The Jakarta Globe reported that, The government expects $3.2 billion of investment to flow into the mining sector this year as foreign investors tur ...
Friday, 07 January 11
14 LARGE-SCALE COAL BASES TO BE BUILT DURING 12TH FIVE-YEAR PLAN - GLOBAL TIMES
During the Twelfth Five-Year Plan period (2011-2015), China aims to build 14 large-scale coal bases, and annex and restructure 20 coal bases in orde ...
Friday, 07 January 11
JSW ENERGY LTD OF INDIA IS LOOKING FOR 45 MILLION TONS OF STEAM COAL FOR 25 YEARS
COALspot.com - Supply of 1.80 mmt (+/- 10%) of steam coal per annum for power plants at Toranagallu and Jaigad.
Accordign to JSWE's websit ...
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- Pipit Mutiara Jaya. PT, Indonesia
- Singapore Mercantile Exchange
- Australian Coal Association
- Directorate General of MIneral and Coal - Indonesia
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- London Commodity Brokers - England
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Power Finance Corporation Ltd., India
- Thai Mozambique Logistica
- Asmin Koalindo Tuhup - Indonesia
- Manunggal Multi Energi - Indonesia
- White Energy Company Limited
- Meralco Power Generation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Maheswari Brothers Coal Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Bhoruka Overseas - Indonesia
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Attock Cement Pakistan Limited
- Jaiprakash Power Ventures ltd
- VISA Power Limited - India
- Central Electricity Authority - India
- Deloitte Consulting - India
- Bhatia International Limited - India
- IHS Mccloskey Coal Group - USA
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Indian Oil Corporation Limited
- Wilmar Investment Holdings
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Dalmia Cement Bharat India
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- ASAPP Information Group - India
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Bharathi Cement Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Energy Development Corp, Philippines
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- ICICI Bank Limited - India
- Ministry of Mines - Canada
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- Jindal Steel & Power Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Barasentosa Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Gujarat Sidhee Cement - India
- SN Aboitiz Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- Central Java Power - Indonesia
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Cigading International Bulk Terminal - Indonesia
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- Vizag Seaport Private Limited - India
- Indogreen Group - Indonesia
- Mjunction Services Limited - India
- San Jose City I Power Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- Madhucon Powers Ltd - India
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- The University of Queensland
- Economic Council, Georgia
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Planning Commission, India
- LBH Netherlands Bv - Netherlands
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- Independent Power Producers Association of India
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Australian Commodity Traders Exchange
- CNBM International Corporation - China
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Metalloyd Limited - United Kingdom
- Uttam Galva Steels Limited - India
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- Sojitz Corporation - Japan
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Global Coal Blending Company Limited - Australia
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Coastal Gujarat Power Limited - India
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
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