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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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Thursday, 16 December 10
LANCO BAGS AUSTRALIAN COAL MINER GRIFFITH - DNA
As part of its strategy to secure coal supplies for meeting its needs in expanding power generation capacities, infrastructure major Lanco Infratech ...
Thursday, 16 December 10
COAL INDIA IN TALKS WITH INDONESIAN CO TO BUY ITS COAL MINES - APN NEWS
APN News reported that, World’s largest coal producer Coal India is in talks with Indonesia’s Sinar Mas Group for acquiring coal mines i ...
Wednesday, 15 December 10
GOVT SETS NEW MINIMUM LEVEL FOR DOMESTIC MARKET SALES - THE JAKARTA POST
The Jakarta Post reported that, Indonesian coal producers are required to sell at least 24.17 percent of their production to the domestic market nex ...
Wednesday, 15 December 10
CAPESIZE RATES ARE NOW AT THEIR LOWEST LEVEL SINCE AUGUST
It was a repeat performance for the market this week, with another increase in earnings for the small sizes but a sharp drop for the Capes. Overall ...
Wednesday, 15 December 10
LARGE ORDERBOOK TO HINDER 2011 DRY BULK MARKET REBOUND DESPITE INCREASED DEMAND SAYS PARAGON SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
A large orderbook which currently stands at 53% of the existing fleet is expected to render 2011 another challenging year for the dry bulk marke ...
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- Binh Thuan Hamico - Vietnam
- SMC Global Power, Philippines
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
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- Standard Chartered Bank - UAE
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- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Samtan Co., Ltd - South Korea
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- VISA Power Limited - India
- Bulk Trading Sa - Switzerland
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- Oldendorff Carriers - Singapore
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- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Georgia Ports Authority, United States
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- Sakthi Sugars Limited - India
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- The Treasury - Australian Government
- Grasim Industreis Ltd - India
- LBH Netherlands Bv - Netherlands
- Therma Luzon, Inc, Philippines
- MS Steel International - UAE
- CNBM International Corporation - China
- Bukit Asam (Persero) Tbk - Indonesia
- Madhucon Powers Ltd - India
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
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- Parry Sugars Refinery, India
- Indika Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Savvy Resources Ltd - HongKong
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Mercuria Energy - Indonesia
- PTC India Limited - India
- Agrawal Coal Company - India
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- Minerals Council of Australia
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Singapore Mercantile Exchange
- Vedanta Resources Plc - India
- Medco Energi Mining Internasional
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- Kartika Selabumi Mining - Indonesia
- Heidelberg Cement - Germany
- Ministry of Finance - Indonesia
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- Antam Resourcindo - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- IEA Clean Coal Centre - UK
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- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Manunggal Multi Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Iligan Light & Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Meralco Power Generation, Philippines
- Baramulti Group, Indonesia
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Sarangani Energy Corporation, Philippines
- Australian Commodity Traders Exchange
- Siam City Cement - Thailand
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Planning Commission, India
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- Ministry of Transport, Egypt
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- London Commodity Brokers - England
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- TeaM Sual Corporation - Philippines
- Posco Energy - South Korea
- Australian Coal Association
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Toyota Tsusho Corporation, Japan
- Commonwealth Bank - Australia
- Kideco Jaya Agung - Indonesia
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Malabar Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Central Java Power - Indonesia
- Electricity Authority, New Zealand
- Merrill Lynch Commodities Europe
- Indo Tambangraya Megah - Indonesia
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- McConnell Dowell - Australia
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- Ind-Barath Power Infra Limited - India
- The State Trading Corporation of India Ltd
- Gujarat Mineral Development Corp Ltd - India
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Mercator Lines Limited - India
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Latin American Coal - Colombia
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
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