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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, 26 October 10
DRY BULK MARKET TO KEEP RISING THIS WEEK ON STRONG CHINESE IRON ORE AND THERMAL COAL DEMAND - HELLENIC SHIPPING
Overcapacitated or not, the dry bulk market keeps its positive momentum as we move forward this week, with the Baltic Dry Index (BDI) rising by 0.77 ...
Monday, 25 October 10
TWO CHINESE COMPANIES INK DEAL TO TAP AUSSIE COAL RESERVES
China Daily reportd that, two Chinese coal firms have teamed up to explore and develop coal resources in an area in Australia that has forecast rese ...
Monday, 25 October 10
DRY BULK MARKET STILL HEAVILY DEPENDENT ON CHINA, POSTS SMALL WEEKLY LOSS OF 1.27% - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With every twitch and turn from China’s metals industry, the dry bulk market is disproportionally affected, as evidenced by the course of the ...
Sunday, 24 October 10
SUPRAMAX VESSELS BEING FIXED AROUND $ 15 K PER DAY DELIVERY N. CHINA FOR TRIP VIA INDONESIA TO INDIA - VISTAAR SHIPPING
COALspot.com: The freight market this week remained almost at same levels with not much change. However the Far East/SE Asia market was quite soft w ...
Saturday, 23 October 10
HEAVY RAINS NO DAMPENER FOR 2010 COAL OUTPUT TARGET, MINISTRY SAYS - THE JAKARTA GLOBE
The Jakarta Globe reported that, National coal production would likely meet the target set by the Energy Ministry despite unusually heavy rain this ...
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- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Bhoruka Overseas - Indonesia
- Carbofer General Trading SA - India
- Maheswari Brothers Coal Limited - India
- Baramulti Group, Indonesia
- Meralco Power Generation, Philippines
- LBH Netherlands Bv - Netherlands
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Merrill Lynch Commodities Europe
- Kobexindo Tractors - Indoneisa
- Minerals Council of Australia
- CNBM International Corporation - China
- Mjunction Services Limited - India
- McConnell Dowell - Australia
- Australian Coal Association
- Samtan Co., Ltd - South Korea
- Port Waratah Coal Services - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vedanta Resources Plc - India
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Oldendorff Carriers - Singapore
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Standard Chartered Bank - UAE
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Siam City Cement - Thailand
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Sinarmas Energy and Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Sindya Power Generating Company Private Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Ministry of Transport, Egypt
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Tata Chemicals Ltd - India
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Ambuja Cements Ltd - India
- ASAPP Information Group - India
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- PowerSource Philippines DevCo
- Romanian Commodities Exchange
- PTC India Limited - India
- Planning Commission, India
- Indonesian Coal Mining Association
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Parliament of New Zealand
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Power Finance Corporation Ltd., India
- Indogreen Group - Indonesia
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Coastal Gujarat Power Limited - India
- Heidelberg Cement - Germany
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- Malabar Cements Ltd - India
- Coal and Oil Company - UAE
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Krishnapatnam Port Company Ltd. - India
- The State Trading Corporation of India Ltd
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- Petron Corporation, Philippines
- Vizag Seaport Private Limited - India
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- Bhatia International Limited - India
- Kumho Petrochemical, South Korea
- Indo Tambangraya Megah - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Coalindo Energy - Indonesia
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Singapore Mercantile Exchange
- Thiess Contractors Indonesia
- SN Aboitiz Power Inc, Philippines
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Orica Mining Services - Indonesia
- Price Waterhouse Coopers - Russia
- Trasteel International SA, Italy
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- The Treasury - Australian Government
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Timah Investasi Mineral - Indoneisa
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- Renaissance Capital - South Africa
- South Luzon Thermal Energy Corporation
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Semirara Mining and Power Corporation, Philippines
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- India Bulls Power Limited - India
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Indian Energy Exchange, India
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
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