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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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Tuesday, 21 December 10
CIL TOLD TO SCOUT MINES ABROAD TO BRIDGE COAL DEFICIT - ECONOMIC TIMES
Economic Times reported that, The government asked state-owned CIL to look for acquiring assets abroad to meet the domestic shortfall of coal.
&q ...
Tuesday, 21 December 10
SHIPPING INDUSTRY RECOVERING, BUT STILL HAMPERED BY OVERSUPPLY OF VESSELS AND DEPRESSED FREIGHT RATES - UNCTAD / HELLENIC SHIPPING
International seaborne trade contracted by 4.5 per cent in 2009, reports UNCTAD´s Review of Maritime Transport 2010 . That decline put seaborn ...
Sunday, 19 December 10
SPOT SUPRAMAX VESSELS WERE FIXED AROUND US$ 13,000 PER DAY FOR TRIP VIA INDONESIA TO INDIA - VISTAAR
COALspot.com - The freight market continued to be soft with the BDI down by 96 points and closed at 1,999 points, touching below 2,000 points on Fri ...
Friday, 17 December 10
THE PANAMAX MARKET HAS EXPERIENCED A SOFTER TENDENCY THIS WEEK - FEARNBULK
Handy
Monotonous Atlantic markets with little fresh enquiry in Black Sea/Med/Continent. Large Supras are achieving usd 21/22k for TA rounds - 2/3 ...
Friday, 17 December 10
NALCO SHORTLISTS COAL FIRMS FOR INDONESIA PROJECT - BUSINESS-STANDARD
Business-Standard reported that, State-owned NALCO today said it has shortlisted two firms for supply of coal for its Rs 18,000-crore (US$ 3,953,003 ...
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- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Mercator Lines Limited - India
- Parliament of New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Riau Bara Harum - Indonesia
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Coal and Oil Company - UAE
- Planning Commission, India
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- Romanian Commodities Exchange
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- San Jose City I Power Corp, Philippines
- OPG Power Generation Pvt Ltd - India
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- ICICI Bank Limited - India
- Alfred C Toepfer International GmbH - Germany
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Economic Council, Georgia
- Holcim Trading Pte Ltd - Singapore
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Larsen & Toubro Limited - India
- Directorate Of Revenue Intelligence - India
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Medco Energi Mining Internasional
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Semirara Mining Corp, Philippines
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Aditya Birla Group - India
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- ASAPP Information Group - India
- Jaiprakash Power Ventures ltd
- Oldendorff Carriers - Singapore
- McConnell Dowell - Australia
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Leighton Contractors Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Ind-Barath Power Infra Limited - India
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- India Bulls Power Limited - India
- White Energy Company Limited
- Indogreen Group - Indonesia
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Sakthi Sugars Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Tamil Nadu electricity Board
- Chamber of Mines of South Africa
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Salva Resources Pvt Ltd - India
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Mercuria Energy - Indonesia
- Rio Tinto Coal - Australia
- Posco Energy - South Korea
- Binh Thuan Hamico - Vietnam
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Goldman Sachs - Singapore
- Thiess Contractors Indonesia
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Star Paper Mills Limited - India
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- Electricity Authority, New Zealand
- Wilmar Investment Holdings
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- The University of Queensland
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- Bhushan Steel Limited - India
- London Commodity Brokers - England
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bhatia International Limited - India
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- GMR Energy Limited - India
- Vedanta Resources Plc - India
- Savvy Resources Ltd - HongKong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- Australian Coal Association
- Global Green Power PLC Corporation, Philippines
- Borneo Indobara - Indonesia
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Global Business Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Makarim & Taira - Indonesia
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Eastern Coal Council - USA
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Anglo American - United Kingdom
- Merrill Lynch Commodities Europe
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