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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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Monday, 27 December 10
RIO TINTO EYES AUSTRALIAN COAL MINER - RTE NEWS
Global resources giant Rio Tinto has made a $3.9 billion bid for Australian coal miner Riversdale.
RTE News reported that, Global resources giant ...
Sunday, 26 December 10
ANGLO SELLS AUSTRALIAN COAL ASSETS - BARCELONA NEWS
Barcelona News reported that, Anglo American has sold off undeveloped Australia coal assets for $577 million.
The global resources giant ha ...
Saturday, 25 December 10
FREIGHT MARKET - LOWEST FIXTURES REPORTED SINCE MID 2009 - CAPT. REDDY
COALspot.com - We wish you a Merry Christmas and a Happy New Year 2011.
The holiday season seems to have severely affected the fr ...
Friday, 24 December 10
CIL SHORTLISTS 21 FIRMS TO IMPORT 250 MT COAL - THE HINDU
The Hindu reported that, Coal India plans to import about 250 million tonnes (mt) over the next 10 years to meet the country's growing requirement. ...
Friday, 24 December 10
DRY BULK OWNERS COULD SOON RECONSIDER SCRAPPING OLDER VESSELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With the dry bulk market close to its lowest levels in months and indeed close to 2010 lows, ship owners could be heading towards scrapyards in a bi ...
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- Globalindo Alam Lestari - Indonesia
- Independent Power Producers Association of India
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Makarim & Taira - Indonesia
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- White Energy Company Limited
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Australian Commodity Traders Exchange
- Vedanta Resources Plc - India
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Attock Cement Pakistan Limited
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Maharashtra Electricity Regulatory Commission - India
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Coalindo Energy - Indonesia
- Ministry of Finance - Indonesia
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- Therma Luzon, Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Meenaskhi Energy Private Limited - India
- ICICI Bank Limited - India
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- PowerSource Philippines DevCo
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kobexindo Tractors - Indoneisa
- Tata Chemicals Ltd - India
- Indian Oil Corporation Limited
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Xindia Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Australian Coal Association
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Agrawal Coal Company - India
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- Iligan Light & Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Aditya Birla Group - India
- Metalloyd Limited - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Georgia Ports Authority, United States
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Mercator Lines Limited - India
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Star Paper Mills Limited - India
- The University of Queensland
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Parry Sugars Refinery, India
- ASAPP Information Group - India
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- Oldendorff Carriers - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Carbofer General Trading SA - India
- Wood Mackenzie - Singapore
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- PetroVietnam Power Coal Import and Supply Company
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Lanco Infratech Ltd - India
- Indogreen Group - Indonesia
- Merrill Lynch Commodities Europe
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Trasteel International SA, Italy
- Posco Energy - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Straits Asia Resources Limited - Singapore
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- PNOC Exploration Corporation - Philippines
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- Indonesian Coal Mining Association
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- International Coal Ventures Pvt Ltd - India
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Sidhee Cement - India
- Jaiprakash Power Ventures ltd
- Baramulti Group, Indonesia
- Sindya Power Generating Company Private Ltd
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- CIMB Investment Bank - Malaysia
- Minerals Council of Australia
- Indo Tambangraya Megah - Indonesia
- VISA Power Limited - India
- Riau Bara Harum - Indonesia
- Meralco Power Generation, Philippines
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Uttam Galva Steels Limited - India
- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- CNBM International Corporation - China
- Latin American Coal - Colombia
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
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