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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, 09 December 10
DRY BULK MARKET LOOKING FOR DIRECTION THIS WEEK, AS CAPESIZE SHIPS END THEIR MISFORTUNES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk has began the week on a positive note capitalizing on the positive sentiment which finally prevailed during the last days of the previo ...
Monday, 06 December 10
NTPC MAY OPT FOR INDONESIA OVER AFRICA, OZ FOR COAL MINES
Country's largest power producer NTPC, which is scouting for coal properties abroad to fuel its power plants back home, may zero in on Indonesia fo ...
Saturday, 04 December 10
INDONESIA TO INDIA AND CHINA SEA FREIGHT UP BY ABOUT US$ 2.50 PMT - CAPT. REDDY
COALspot.com - The freight market even though remained weak, but towards end of the week the market seemed to firm up.
The BDI was almost at sam ...
Saturday, 04 December 10
OFF WEST COAST OF INDIA TONNAGE IS SEEMINGLY QUITE SPARSE - FEARNBULK
Handy
The Atlantic markets are weak and remained unusually calm after the Thanksgiving ...
Friday, 03 December 10
INDONESIAN LOW RANK COAL IS ATTRACTING COAL BUYERS FROM INDIA AND CHINA
COALspot.com - Bhakti Energi Persada has sold out its whole coal production until the end of 2011, Jeffry Mulyono said during McCloskey Asia P ...
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- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- Petrochimia International Co. Ltd.- Taiwan
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Gujarat Sidhee Cement - India
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Posco Energy - South Korea
- Miang Besar Coal Terminal - Indonesia
- Agrawal Coal Company - India
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Grasim Industreis Ltd - India
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Attock Cement Pakistan Limited
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- ASAPP Information Group - India
- Pendopo Energi Batubara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Carbofer General Trading SA - India
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- McConnell Dowell - Australia
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- Thai Mozambique Logistica
- India Bulls Power Limited - India
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- Eastern Energy - Thailand
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- CNBM International Corporation - China
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Borneo Indobara - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indian Oil Corporation Limited
- Interocean Group of Companies - India
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Bhatia International Limited - India
- Wilmar Investment Holdings
- European Bulk Services B.V. - Netherlands
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vizag Seaport Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Ministry of Transport, Egypt
- Coastal Gujarat Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Intertek Mineral Services - Indonesia
- Renaissance Capital - South Africa
- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Independent Power Producers Association of India
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Ministry of Finance - Indonesia
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- The University of Queensland
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Planning Commission, India
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Global Green Power PLC Corporation, Philippines
- Electricity Generating Authority of Thailand
- Therma Luzon, Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- MS Steel International - UAE
- Mjunction Services Limited - India
- Xindia Steels Limited - India
- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- Anglo American - United Kingdom
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