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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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Monday, 01 July 13
12TH CLEAN COAL FORUM INDONESIA 2013
Press Release: Produced by CDMC Events, The 12th Clean Coal Forum Indonesia 2013 will be held on Dec 5-6,2013 in Jakarta, Indonesia. It will generat ...
Monday, 01 July 13
INDIA AND CHINA STILL DOMINATING THE INDONESIAN THERMAL COAL EXPORT MARKET
COALspot.com: Indonesia, the world's largest multi types coal exporter shipped 35.83* million tons of coal in May 2013, 1.40 per cent l ...
Sunday, 30 June 13
YEAR 2014 INDO SUB-BIT COAL SWAPS EXPECTED TO STAY BELOW 2013 LEVEL
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average August 2013 delivery have gained 0.08 percent on a day lost on week ...
Sunday, 30 June 13
CAPESIZE RATES SEEN INCREASING ON HIGH DEMAND - VISTAAR
COALspot.com - The BDI continued to rise and saw a big gain on Friday. BDI increased 14 per cent week ended 28 June 2013, closed at 1171 points driv ...
Friday, 28 June 13
U.S. PRODUCED 1.52 PERCENT LESS COAL WEEK ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 19.40 million short tons (mmst) of ...
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- Altura Mining Limited, Indonesia
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- Kohat Cement Company Ltd. - Pakistan
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- Wilmar Investment Holdings
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- Barasentosa Lestari - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- ICICI Bank Limited - India
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- Global Business Power Corporation, Philippines
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- CNBM International Corporation - China
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- Orica Mining Services - Indonesia
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- Ministry of Transport, Egypt
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- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- Minerals Council of Australia
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- Latin American Coal - Colombia
- Economic Council, Georgia
- The Treasury - Australian Government
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- Toyota Tsusho Corporation, Japan
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Sree Jayajothi Cements Limited - India
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- Bahari Cakrawala Sebuku - Indonesia
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- Thiess Contractors Indonesia
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- PTC India Limited - India
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- Straits Asia Resources Limited - Singapore
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- Carbofer General Trading SA - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Attock Cement Pakistan Limited
- Independent Power Producers Association of India
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- Deloitte Consulting - India
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Australian Coal Association
- Eastern Coal Council - USA
- Gujarat Mineral Development Corp Ltd - India
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
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- Petrochimia International Co. Ltd.- Taiwan
- AsiaOL BioFuels Corp., Philippines
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- Chamber of Mines of South Africa
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- Lanco Infratech Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Goldman Sachs - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- CIMB Investment Bank - Malaysia
- Agrawal Coal Company - India
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- Siam City Cement PLC, Thailand
- VISA Power Limited - India
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- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
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