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Tuesday, 08 October 13
CHINA: INTENSE COMPETITION AMONG DOMESTIC COAL MINERS AS 2013 IMPORT DEMAND REMAINS STRONG - WOOD MACKENZIE
 Prices will not fall under RMB500/t or risk supply availability to the coastal market
Despite China's lower economic growth, Wood Mackenzie says that import demand will still meet previous high expectations, although overall demand growth will be lower. This is due to lower seaborne coal prices compared to domestic coal prices in coastal China. As such, domestic producers are competing for market share by lowering prices in spite of negative margins. This explains the recent continuous drop in Chinese coal prices. However, Wood Mackenzie says that coastal China coal prices will be supported at *RMB500 per tonne (t) as at this price level 40% of domestic supply operates at negative margins.
China's gross domestic product (GDP) growth has slowed from 9.3% to 7.5% from 2011 to 2013. As a result, power demand growth has slowed in China and coal demand in coastal provinces has remained flat, staying at 2011 levels of 1.2 billion tonnes(Bt). In contrast, seaborne demand increased rapidly - This year, Wood Mackenzie expects China to import 235Mt of thermal and 67Mt of metallurgical coal, up from 168Mt and 31Mt respectively in 2011. This translates to a growth in share of seaborne imports into coastal China from 17% to about 25% between 2011 to 2013.
Wood Mackenzie's Senior Analyst Coal Market Research, Mr. Prakash Sharma says, "The trend of increased coal imports has been aided by weak coal prices in the international market. This means that Chinese coal import demand is almost entirely driven by the competitiveness of imported versus domestic supply. As such, large Chinese miners are adopting volume strategy by producing more to bring down operating costs and pricing lower to maintain market share."
These measures will hold market share in the short-term but may be counter-effective if prices fall too low in coastal China. Therefore we believe prices find a floor at RMB500/t. Small to medium sized domestic players will be most affected due to relatively high fixed labour costs and mine safety expenses in China. Large producers such as Shenhua and China Coal, who have resorted to aggressive pricing, contribute almost 50% of China's domestic coal production. The remainder 50% comes from the small to medium size miners.
Rohan Kendall, Senior Analyst for Coal Supply Research, says, "At RMB 500/t, we estimate that 40% of China's thermal coal production will produce at negative margins. Small to medium sized producers operating at negative margins, particularly those producing low-energy coal, face a real risk of mine closures. The situation may also trigger further consolidation of small loss-making mines in China."
Summarizing, Mr Sharma says, "The 40% of domestic production producing at negative margins equates to about 150% of the size of the current seaborne market. Full replacement volumes cannot feasibly be sourced from imports without creating a price response that will actually incentivise domestic miners to remain in production. Therefore, we believe prices will be supported above RMB 500/t, turning the tide on the current price trend."
*All prices refer to benchmark FOB Qinghuangdao Thermal coal price (5500 kcal/kg NAR basis) inclusive of 17% VAT.
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com
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Thursday, 17 October 13
CHINA'S COAL IMPORTS DOWN 9.4% TO 25.96 MMT IN AUGUST
COALspot.com: China's August Imported coal volumes down 9.4% m-m but up 27% y-y, BNP said in its latest China Coal & Power report released on 1 ...
Wednesday, 16 October 13
NEW STRATEGIES AND OPPORTUNITIES IN A RAPIDLY EVOLVING COAL INDUSTRY
The 12th Annual Coal Markets assumes even more significance as the industry seeks more market information, inputs on trade strategies, supply and de ...
Wednesday, 16 October 13
CAPES: RATES DROPPED; PANAMAX: ADVANCED - INTERMODAL
After a month and a half of straight weekly positive closings, the BDI has finished the week in the red. Monday started slow as holidays in the East ...
Wednesday, 16 October 13
WILL THIS LATEST DRY BULK MARKET UPTREND PROVE TO BE AS LONG-LIVED OR JUST ANOTHER MOMENTARY SPIKE? - CHRISTOS MANZTIOS
COALspot.com: So here we are again facing the same old question: Will this latest market uptrend prove to be as long-lived as all owners hope or jus ...
Wednesday, 16 October 13
KOSEP TO IMPORT 0.49 MILLION TONS OF 4600 NAR COAL FOR JAN - FEB '14
COALspot.com - Korea South-East Power Co., a Korean generator and distributor of electricity on behalf of five Korean Gencos intends to procure 490, ...
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- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- London Commodity Brokers - England
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- Sical Logistics Limited - India
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- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
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- Banpu Public Company Limited - Thailand
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
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- Samtan Co., Ltd - South Korea
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Iligan Light & Power Inc, Philippines
- New Zealand Coal & Carbon
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- Price Waterhouse Coopers - Russia
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Cement Manufacturers Association - India
- ICICI Bank Limited - India
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- Deloitte Consulting - India
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- Parry Sugars Refinery, India
- Independent Power Producers Association of India
- PetroVietnam Power Coal Import and Supply Company
- Grasim Industreis Ltd - India
- Simpson Spence & Young - Indonesia
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Renaissance Capital - South Africa
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- India Bulls Power Limited - India
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Madhucon Powers Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Goldman Sachs - Singapore
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- Global Coal Blending Company Limited - Australia
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- Thai Mozambique Logistica
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- Sakthi Sugars Limited - India
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- Africa Commodities Group - South Africa
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
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- Ministry of Finance - Indonesia
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- Indian Oil Corporation Limited
- South Luzon Thermal Energy Corporation
- Ceylon Electricity Board - Sri Lanka
- Bhoruka Overseas - Indonesia
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- Attock Cement Pakistan Limited
- PTC India Limited - India
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- Billiton Holdings Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Vedanta Resources Plc - India
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Indika Energy - Indonesia
- Anglo American - United Kingdom
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Bulk Trading Sa - Switzerland
- VISA Power Limited - India
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- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Edison Trading Spa - Italy
- Minerals Council of Australia
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- Larsen & Toubro Limited - India
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Mjunction Services Limited - India
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- Bangladesh Power Developement Board
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Romanian Commodities Exchange
- Indian Energy Exchange, India
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Borneo Indobara - Indonesia
- Kobexindo Tractors - Indoneisa
- Siam City Cement - Thailand
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- Eastern Coal Council - USA
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- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- Tata Chemicals Ltd - India
- Parliament of New Zealand
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Kideco Jaya Agung - Indonesia
- Salva Resources Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
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