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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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Wednesday, 21 August 13
DRY BULK SHIPPING - POSITIVE WINDOW FOR CAPESIZE OWNERS - PETER SAND
By: Peter Sand, Chief Shipping Analyst, BIMCO
Demand:
“Expect the unexpected from the dry bulk market” was what we wrote last time ar ...
Wednesday, 21 August 13
RATES FOR CAPES MOVED DECISIVELY NORTH THIS WEEK - INTERMODAL
COALspot.com - Right when the BDI seemed ready for another dive below the 1000 points level, the Dry Bulk market made significant comeback this week ...
Tuesday, 20 August 13
AUSTRALIA NEWCASTLE COAL EXPORTS FALL 19.15 PERCENT ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port fell 19.15 per cent week on week to 2.39 million mt f ...
Tuesday, 20 August 13
CAPESIZE RATES MORE SENSITIVE TO DEMAND - COMMODORE RESEARCH & CONSULTANCY
COALspot.com : Approximately 71.50 million tons of iron ore is now stockpiled at Chinese ports, 900,000 tons (-1%) less than a week ago, Commodore R ...
Sunday, 18 August 13
SUB-BIT FOB INDONESIA COAL SWAP : ON POSITIVE DIRECTION ON DAY, WEEK AND MONTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery US$ 1.83 up month on month. The swap was moved positive ...
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- PNOC Exploration Corporation - Philippines
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- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- Maharashtra Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
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- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
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- Ceylon Electricity Board - Sri Lanka
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- Georgia Ports Authority, United States
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- Parliament of New Zealand
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- Price Waterhouse Coopers - Russia
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- Ministry of Mines - Canada
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- Australian Commodity Traders Exchange
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- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Bhoruka Overseas - Indonesia
- Electricity Authority, New Zealand
- Chamber of Mines of South Africa
- Tata Chemicals Ltd - India
- Larsen & Toubro Limited - India
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- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Thai Mozambique Logistica
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- Indian Oil Corporation Limited
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- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
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- Bank of Tokyo Mitsubishi UFJ Ltd
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- Marubeni Corporation - India
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
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- European Bulk Services B.V. - Netherlands
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- Iligan Light & Power Inc, Philippines
- PowerSource Philippines DevCo
- Minerals Council of Australia
- Ministry of Transport, Egypt
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- Latin American Coal - Colombia
- London Commodity Brokers - England
- Cement Manufacturers Association - India
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- The University of Queensland
- Baramulti Group, Indonesia
- Therma Luzon, Inc, Philippines
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- Intertek Mineral Services - Indonesia
- Salva Resources Pvt Ltd - India
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- Aditya Birla Group - India
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
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- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
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- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Savvy Resources Ltd - HongKong
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- Edison Trading Spa - Italy
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- Australian Coal Association
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- Energy Link Ltd, New Zealand
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