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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, 02 December 10
INDIA'S COAL SHORTAGE TO DEEPEN NEXT YEAR - MONEY CONTROL
Money Control reported that, India's coal deficit will deepen sharply next year, its coal minister said on Tuesday, forcing Asia's third largest e ...
Thursday, 02 December 10
CIL INCHES CLOSER TO PEABODY STAKE DEAL - THE TELEGRAPH INDIA
The Telegraph India reported that, state-run Coal India Ltd (CIL) hopes to complete negotiations to buy over 10 per cent in Australian miner Peabody ...
Thursday, 02 December 10
DRY BULK MARKET WEIGHED DOWN BY CAPESIZE BLUES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The negative sentiment currently undergoing in the capesize market has kept the dry bulk market’s benchmark, the Baltic Dry Index (BDI) on the ...
Monday, 29 November 10
NUCLEAR SUPERTANKERS TO SHAKE UP SHIPPING - THIS IS MONEY
This is money reported that, plans are under way that could see nuclear-powered supertankers sailing the world’s shipping lanes, refuelling on ...
Sunday, 28 November 10
FREIGHT MARKET SEEMS TO BE NERVOUS - VISTAAR
COALspot.com - The freight market continued to remain uncertain even though only cape index was down by 8.31 pct.
Overall the market seems to be ...
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- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- Borneo Indobara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- CNBM International Corporation - China
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- Star Paper Mills Limited - India
- Sinarmas Energy and Mining - Indonesia
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Australian Commodity Traders Exchange
- Madhucon Powers Ltd - India
- Grasim Industreis Ltd - India
- Bhoruka Overseas - Indonesia
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Larsen & Toubro Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- Coal and Oil Company - UAE
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Barasentosa Lestari - Indonesia
- Coalindo Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Dalmia Cement Bharat India
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- Commonwealth Bank - Australia
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Meenaskhi Energy Private Limited - India
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Meralco Power Generation, Philippines
- Bukit Makmur.PT - Indonesia
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Krishnapatnam Port Company Ltd. - India
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Standard Chartered Bank - UAE
- SN Aboitiz Power Inc, Philippines
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- Oldendorff Carriers - Singapore
- ICICI Bank Limited - India
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Bhatia International Limited - India
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Antam Resourcindo - Indonesia
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Eastern Energy - Thailand
- Mintek Dendrill Indonesia
- White Energy Company Limited
- Vedanta Resources Plc - India
- Orica Mining Services - Indonesia
- The Treasury - Australian Government
- Agrawal Coal Company - India
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Independent Power Producers Association of India
- Jorong Barutama Greston.PT - Indonesia
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Rashtriya Ispat Nigam Limited - India
- Riau Bara Harum - Indonesia
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Directorate Of Revenue Intelligence - India
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Sarangani Energy Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- Bharathi Cement Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Kobexindo Tractors - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- Baramulti Group, Indonesia
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Banpu Public Company Limited - Thailand
- Gujarat Sidhee Cement - India
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Energy Link Ltd, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Ambuja Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Jaiprakash Power Ventures ltd
- IHS Mccloskey Coal Group - USA
- Africa Commodities Group - South Africa
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Merrill Lynch Commodities Europe
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