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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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Wednesday, 05 January 11
HIGHER COAL PRICES LIFT UP COAL STOCKS
Thermal coal price this month has gone up 5.63% to US$127.70 per ton today from mid last month at US$120.89 per ton.
Thermal coal price for next ...
Wednesday, 05 January 11
BUKIT ASAM TARGETS 20% BUY TO GROW COAL TRANSPORT CAPACITY - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesian coal producer Tambang Batubara Bukit Asam is considering buying an additional 20 percent stake in Bukit ...
Wednesday, 05 January 11
FLOODING IN AUSTRALIA WILL CAUSE COAL PRICES TO SPIKE AT LEAST 20 PERCENT
Rising coal prices are set to spike at least 20 per cent higher because of supply shortages due to severe flooding in Australia, adding cost pressur ...
Wednesday, 05 January 11
DRY BULK MARKET BEGINS NEW YEAR ON SOUR NOTE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Seasonal factors like the worst flooding in Australia’s Queensland in half a century, coupled with thin trade activity has put the dry bulk ma ...
Tuesday, 04 January 11
THE WCI-CHINA ROUTE WAS TRADED IN THE MID US$ 10,000S - BRS DRY BULK
As reported by BRS Dry Bulk, after a stronger than expected performance in 2010, rates finished on a sombre note in December with the BDI at1,773 po ...
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- Ministry of Mines - Canada
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Planning Commission, India
- Latin American Coal - Colombia
- Petrochimia International Co. Ltd.- Taiwan
- Kobexindo Tractors - Indoneisa
- Grasim Industreis Ltd - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Aditya Birla Group - India
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Formosa Plastics Group - Taiwan
- Kohat Cement Company Ltd. - Pakistan
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Sarangani Energy Corporation, Philippines
- Ministry of Finance - Indonesia
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parliament of New Zealand
- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- Larsen & Toubro Limited - India
- Madhucon Powers Ltd - India
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- AsiaOL BioFuels Corp., Philippines
- Indian Energy Exchange, India
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Asmin Koalindo Tuhup - Indonesia
- Intertek Mineral Services - Indonesia
- Altura Mining Limited, Indonesia
- Metalloyd Limited - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Makarim & Taira - Indonesia
- Indika Energy - Indonesia
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Australian Coal Association
- Australian Commodity Traders Exchange
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Savvy Resources Ltd - HongKong
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- McConnell Dowell - Australia
- ASAPP Information Group - India
- Ind-Barath Power Infra Limited - India
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- Parry Sugars Refinery, India
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Bahari Cakrawala Sebuku - Indonesia
- VISA Power Limited - India
- Georgia Ports Authority, United States
- CIMB Investment Bank - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- The State Trading Corporation of India Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- SMG Consultants - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indian Oil Corporation Limited
- Independent Power Producers Association of India
- Interocean Group of Companies - India
- PowerSource Philippines DevCo
- Leighton Contractors Pty Ltd - Australia
- Siam City Cement - Thailand
- Carbofer General Trading SA - India
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Edison Trading Spa - Italy
- Economic Council, Georgia
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Sojitz Corporation - Japan
- Kalimantan Lumbung Energi - Indonesia
- Standard Chartered Bank - UAE
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- Medco Energi Mining Internasional
- Goldman Sachs - Singapore
- The University of Queensland
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Semirara Mining and Power Corporation, Philippines
- The Treasury - Australian Government
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- Uttam Galva Steels Limited - India
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Trasteel International SA, Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- Antam Resourcindo - Indonesia
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- Heidelberg Cement - Germany
- Eastern Energy - Thailand
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Rio Tinto Coal - Australia
- SMC Global Power, Philippines
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