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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, 15 December 10
SMALLER DRY BULK VESSELS ARE LOOKING UP, LARGER ONES FAIL TO DELIVER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market lost further ground at the beginning of the week, in what could prove one of the slowest periods ship owners have been faced. Ye ...
Tuesday, 14 December 10
COAL IMPORTS MAY INCREASE 78% TO CHINA, INDIA: ENERGY MARKETS - BUSINESS WEEK
Business Week reported that, China and India may increase imports of coal by 78 percent to 337 million metric tons next year, further driving up pri ...
Tuesday, 14 December 10
BANPU PLANNING PRODUCTION BOOM - BANGKOK POST
Australian, Indonesian output to lead growth
Bangkok Post reported that, Banpu Plc, Asean's largest coal miner, wants to nearly double its coal ...
Tuesday, 14 December 10
THE FREIGHT RATES FROM INDONESIA TO INDIA AND CHINA REMAINED FIRM - CAPT. REDDY
COALspot.com - The freight market continued to be soft with the Cape sector most effected which was down by 289 points and closed at 2,694 poi ...
Monday, 13 December 10
ICE FUTURES EUROPE TO LAUNCH IHS MCCLOSKEY INDONESIAN SUB-BITUMINOUS FOB MARKER COAL CONTRACTS - MONDOVISIONE
Mondovisione reported that, IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over ...
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- Intertek Mineral Services - Indonesia
- SMG Consultants - Indonesia
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Mercator Lines Limited - India
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ambuja Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Mjunction Services Limited - India
- Oldendorff Carriers - Singapore
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Ceylon Electricity Board - Sri Lanka
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- Chettinad Cement Corporation Ltd - India
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Siam City Cement PLC, Thailand
- International Coal Ventures Pvt Ltd - India
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Independent Power Producers Association of India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Planning Commission, India
- Global Business Power Corporation, Philippines
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Thai Mozambique Logistica
- Grasim Industreis Ltd - India
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Transport, Egypt
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- GN Power Mariveles Coal Plant, Philippines
- Energy Link Ltd, New Zealand
- Pipit Mutiara Jaya. PT, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meralco Power Generation, Philippines
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- Miang Besar Coal Terminal - Indonesia
- Star Paper Mills Limited - India
- PowerSource Philippines DevCo
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- LBH Netherlands Bv - Netherlands
- Global Green Power PLC Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Banpu Public Company Limited - Thailand
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Finance - Indonesia
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Marubeni Corporation - India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- India Bulls Power Limited - India
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Australian Coal Association
- Orica Mining Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Georgia Ports Authority, United States
- Borneo Indobara - Indonesia
- Bhoruka Overseas - Indonesia
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- Eastern Coal Council - USA
- Indika Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Essar Steel Hazira Ltd - India
- Economic Council, Georgia
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- Minerals Council of Australia
- Sakthi Sugars Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Gujarat Sidhee Cement - India
- London Commodity Brokers - England
- Metalloyd Limited - United Kingdom
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Meenaskhi Energy Private Limited - India
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- CNBM International Corporation - China
- Simpson Spence & Young - Indonesia
- IHS Mccloskey Coal Group - USA
- Trasteel International SA, Italy
- Kideco Jaya Agung - Indonesia
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