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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, 17 July 13
NEWCASTLE COAL EXPORTS FELL 3.85% ON WEEK
COALspot.com: Newcastle port in Australia has loaded 2,860,149 tons of coal for the week ended 0700 hours 15 July 2013, Newcastle Port Corp. s ...
Wednesday, 17 July 13
TORN BETWEEN A CREDIT CRUNCH AND SUSTAINABLE GROWTH - GEORGE DERMATIS
COALspot.com: In 2012 China expanded at a rate of 7.8%, its worst annual performance in 13 years, raising criticism over the newly appointed governm ...
Tuesday, 16 July 13
TAKE - OR - PAY CONTRACTS CONTINUE TO INCENTIVISE AUSTRALIAN COAL PRODUCERS DESPITE POTENTIAL NEGATIVE CASH MARGINS - WOOD MACKENZIE
Australia's coal production has continued to grow, despite lower coal prices in 2013. Global investors and suppliers are therefore questioning whet ...
Monday, 15 July 13
INDONESIAN GOVERNMENT HAS REVISED DOWN ITS JULY BENCH-MARK COAL PRICE TO US$ 81.69 PER MT
COALspot. com - Indonesian Coal Price Reference dropped 3.75 % and hitting a 2013 low. The Indonesian government has revised down its owned coal ben ...
Monday, 15 July 13
INDO COAL SWAPS ARE STRUGGLING FOR RIGHT DIRECTION
COALspot.com – Indo coal swaps are struggling to find the right direction. Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 d ...
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- SMC Global Power, Philippines
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Bhoruka Overseas - Indonesia
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
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- Sindya Power Generating Company Private Ltd
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- Ministry of Finance - Indonesia
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- Singapore Mercantile Exchange
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- Altura Mining Limited, Indonesia
- Bukit Baiduri Energy - Indonesia
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Coalindo Energy - Indonesia
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
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- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- South Luzon Thermal Energy Corporation
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- PNOC Exploration Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Romanian Commodities Exchange
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- Eastern Coal Council - USA
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- Sarangani Energy Corporation, Philippines
- Minerals Council of Australia
- Wood Mackenzie - Singapore
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- Indonesian Coal Mining Association
- Madhucon Powers Ltd - India
- MS Steel International - UAE
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indo Tambangraya Megah - Indonesia
- Directorate Of Revenue Intelligence - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Deloitte Consulting - India
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
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- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Banpu Public Company Limited - Thailand
- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Malabar Cements Ltd - India
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- London Commodity Brokers - England
- PTC India Limited - India
- Chettinad Cement Corporation Ltd - India
- Uttam Galva Steels Limited - India
- Vizag Seaport Private Limited - India
- Aboitiz Power Corporation - Philippines
- McConnell Dowell - Australia
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- Central Electricity Authority - India
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- Sojitz Corporation - Japan
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- Jaiprakash Power Ventures ltd
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- Coal and Oil Company - UAE
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- Latin American Coal - Colombia
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- Eastern Energy - Thailand
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Bhushan Steel Limited - India
- Formosa Plastics Group - Taiwan
- Georgia Ports Authority, United States
- Simpson Spence & Young - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Merrill Lynch Commodities Europe
- Borneo Indobara - Indonesia
- White Energy Company Limited
- Renaissance Capital - South Africa
- Barasentosa Lestari - Indonesia
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Jindal Steel & Power Ltd - India
- SMG Consultants - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- VISA Power Limited - India
- Standard Chartered Bank - UAE
- Economic Council, Georgia
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Tata Chemicals Ltd - India
- Oldendorff Carriers - Singapore
- Australian Commodity Traders Exchange
- Lanco Infratech Ltd - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Chamber of Mines of South Africa
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Timah Investasi Mineral - Indoneisa
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
- Power Finance Corporation Ltd., India
- Sical Logistics Limited - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Vedanta Resources Plc - India
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- International Coal Ventures Pvt Ltd - India
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- Marubeni Corporation - India
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
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