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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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Saturday, 10 August 13
DEMOLITION ACTIVITY TO BE CRUCIAL AGAIN IN PROVIDING SUPPORT TO THE DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
We appear to have forgotten demolition activity this year, with the Baltic Dry Index gaining traction in the latter part of the second half and emer ...
Friday, 09 August 13
US PRODUCED 4.00 PERCENT LESS COAL ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.00 million short tons (mmst) of ...
Thursday, 08 August 13
HANDY : NO POSITIVE SENTIMENT FOR THE FAR EAST MARKET - FEARNRESEARCH
Handy
No positive sentiment for the Far East market. There are a number of ships coming open in SE Asia this week and owners rating mid/high USD 8k ...
Thursday, 08 August 13
MALAYSIA HOSTS THIRD ANNUAL ASIAN SUB-BITUMINOUS COAL USERS' GROUP CONFERENCE
Press Release : The third Annual Asian Sub-Bituminous Coal Users’ Group (ASBCUG) conference convenes Sept. 30-Oct. 3 at the Eastern & Orie ...
Wednesday, 07 August 13
HANDIES : FINDING IT DIFFICULT TO SUSTAIN THEIR PREVIOUS LEVELS - KONSTANTINOS KONTOMICHIS
Broker's insight
by Konstantinos Kontomichis,
SnP Broker
Entering the most predictable month of the year, as expected the seasonal effects ha ...
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- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Maharashtra Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Indian Oil Corporation Limited
- VISA Power Limited - India
- Anglo American - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Attock Cement Pakistan Limited
- International Coal Ventures Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Tamil Nadu electricity Board
- Australian Coal Association
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- ICICI Bank Limited - India
- The Treasury - Australian Government
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Latin American Coal - Colombia
- South Luzon Thermal Energy Corporation
- TeaM Sual Corporation - Philippines
- Energy Link Ltd, New Zealand
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Uttam Galva Steels Limited - India
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Goldman Sachs - Singapore
- Jaiprakash Power Ventures ltd
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thai Mozambique Logistica
- Power Finance Corporation Ltd., India
- Indian Energy Exchange, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Trasteel International SA, Italy
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Aditya Birla Group - India
- IEA Clean Coal Centre - UK
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- The State Trading Corporation of India Ltd
- Rio Tinto Coal - Australia
- Interocean Group of Companies - India
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- Makarim & Taira - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Aboitiz Power Corporation - Philippines
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Bhatia International Limited - India
- Madhucon Powers Ltd - India
- Energy Development Corp, Philippines
- Leighton Contractors Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
- Chamber of Mines of South Africa
- PNOC Exploration Corporation - Philippines
- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
- Cement Manufacturers Association - India
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Romanian Commodities Exchange
- Electricity Authority, New Zealand
- Georgia Ports Authority, United States
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Semirara Mining and Power Corporation, Philippines
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Cigading International Bulk Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Australian Commodity Traders Exchange
- Mintek Dendrill Indonesia
- Videocon Industries ltd - India
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Parry Sugars Refinery, India
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- CIMB Investment Bank - Malaysia
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Siam City Cement PLC, Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Borneo Indobara - Indonesia
- Kaltim Prima Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Economic Council, Georgia
- Independent Power Producers Association of India
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
- London Commodity Brokers - England
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Oldendorff Carriers - Singapore
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- Kobexindo Tractors - Indoneisa
- Coal and Oil Company - UAE
- Sojitz Corporation - Japan
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Planning Commission, India
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Vizag Seaport Private Limited - India
- Price Waterhouse Coopers - Russia
- Binh Thuan Hamico - Vietnam
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
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