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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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Friday, 07 January 11
SRI LANKA NEW PORT TO OFFER SHIP FUEL IN MAY - LBO
LOB reported that, The Sri Lanka Ports Authority (SLPA) plans to start bunkering or ship fuel operations at a new port in southern Hambantota in May ...
Friday, 07 January 11
DRY BULK MARKET ON A FREEFALL, AS THE NEW YEAR EARLY DAYS DONT BRING MANY CHEERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market is facing its worst slump in more than two years, falling by 4.75% yesterday to reach 1,544 points, on top of an additional 4.2% ...
Thursday, 06 January 11
OVERSEAS & GENERAL SIGNS AGREEMENT TO EXPAND FOOTPRINT ON COAL LEASE IN INDONESIA - PROACTIVE INVESTORS
Proactive Investors reported that, Overseas & General (ASX: OGL) has entered into a joint operating agreement on the Jambi Coal Lease in Sumatra ...
Thursday, 06 January 11
BANPU EXPECTS ROSY 2011 AS COAL PRICES SKYROCKET - BANGKOK POST
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, expects minimal impact from the production stoppage at its Daning mine in China ...
Thursday, 06 January 11
COKING COAL CONTRACT PRICE MAY RISE 33% ON AUSTRALIAN FLOODS - BLOOMBERG
Bloomberg reported that, Steelmakers in Asia may be forced to pay as much as 33 percent more for hard coking coal after the worst floods in 50 years ...
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- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- PTC India Limited - India
- Bhushan Steel Limited - India
- Altura Mining Limited, Indonesia
- Lanco Infratech Ltd - India
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
- Bangladesh Power Developement Board
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Australian Coal Association
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- VISA Power Limited - India
- Siam City Cement - Thailand
- Agrawal Coal Company - India
- Electricity Authority, New Zealand
- International Coal Ventures Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Thiess Contractors Indonesia
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Georgia Ports Authority, United States
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Eastern Coal Council - USA
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Mintek Dendrill Indonesia
- Sree Jayajothi Cements Limited - India
- Posco Energy - South Korea
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Bhoruka Overseas - Indonesia
- Energy Development Corp, Philippines
- Cement Manufacturers Association - India
- Deloitte Consulting - India
- Antam Resourcindo - Indonesia
- Marubeni Corporation - India
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Aboitiz Power Corporation - Philippines
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- PNOC Exploration Corporation - Philippines
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Jaiprakash Power Ventures ltd
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- Tata Chemicals Ltd - India
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Directorate Of Revenue Intelligence - India
- London Commodity Brokers - England
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- Madhucon Powers Ltd - India
- Borneo Indobara - Indonesia
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Sojitz Corporation - Japan
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Planning Commission, India
- Indian Oil Corporation Limited
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- Oldendorff Carriers - Singapore
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Indika Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Tamil Nadu electricity Board
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- Sarangani Energy Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- Eastern Energy - Thailand
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Timah Investasi Mineral - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Mercator Lines Limited - India
- Thai Mozambique Logistica
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Meralco Power Generation, Philippines
- Metalloyd Limited - United Kingdom
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Krishnapatnam Port Company Ltd. - India
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- Coalindo Energy - Indonesia
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Therma Luzon, Inc, Philippines
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