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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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Sunday, 13 October 13
API 8 CFR SOUTH CHINA COAL - AVERAGE Q4 2013 DELIVERY FELL 0.30 PERCEPT ON WEEK
COALspot.com : API 8 CFR South China Coal swaps for average Q4 2013 delivery fell 0.30 percept week on week on Friday 11 October 2013. The CFR South ...
Saturday, 12 October 13
PANAMAX: OWNERS ARE AT US$ 17-18.5K PER DAY; CHARTERERS ARE AT US$ 15.5-16K - CAPT. REDDY
COALspot.com - The futures market was heavily down on the cape size vessels and the physical average charterer rates on cape size vessels dropped by ...
Friday, 11 October 13
DRY BULK FREIGHT RATE POSITIVE MOMENTUM TO BE SUPPORTED BY HIGHER DEMAND SAYS BIMCO - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
BIMCO released its latest short term research on the shipping markets, estimating that the elevated level of Capesize TC average rates i ...
Friday, 11 October 13
US COAL PRODUCTION FALLS 7.70% IN SEPTEMBER
COALspot.com – United States the world’s second largest coal producer produced approximately 17.70 million short tons (mmst) of coal in ...
Thursday, 10 October 13
NPC AUSTRALIA SHIPPED 2.99 MILLION TONS OF COAL W-O-W
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 12.04 per cent week on week to 2.99 million mt for ...
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- Independent Power Producers Association of India
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- The Treasury - Australian Government
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- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Thiess Contractors Indonesia
- Latin American Coal - Colombia
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- TNB Fuel Sdn Bhd - Malaysia
- White Energy Company Limited
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- Economic Council, Georgia
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- Ministry of Finance - Indonesia
- Australian Coal Association
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- Romanian Commodities Exchange
- Rio Tinto Coal - Australia
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
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- Mercuria Energy - Indonesia
- Power Finance Corporation Ltd., India
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- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
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- Videocon Industries ltd - India
- Trasteel International SA, Italy
- Minerals Council of Australia
- McConnell Dowell - Australia
- MS Steel International - UAE
- Cigading International Bulk Terminal - Indonesia
- Indonesian Coal Mining Association
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- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Africa Commodities Group - South Africa
- Bharathi Cement Corporation - India
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- Electricity Generating Authority of Thailand
- Tata Chemicals Ltd - India
- Bhoruka Overseas - Indonesia
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Merrill Lynch Commodities Europe
- European Bulk Services B.V. - Netherlands
- Kepco SPC Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Holcim Trading Pte Ltd - Singapore
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Indogreen Group - Indonesia
- Siam City Cement PLC, Thailand
- Sical Logistics Limited - India
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- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Tamil Nadu electricity Board
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Ind-Barath Power Infra Limited - India
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- GVK Power & Infra Limited - India
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