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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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Friday, 07 June 13
MEDITERRANEAN COAL MARKETS
Press Release: 3rd International Conference Mediterranean Coal Markets will be held on 16-17th of September 2013, Istanbul, Turkey, Ceylan Intercont ...
Friday, 07 June 13
US'S COAL PRODUCTION INCREASED BY 0.54 PER CENT THE WEEK ENDED JUNE 1
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 18.60 million short tons (mmst) of ...
Thursday, 06 June 13
WE ARE SEEING SOME FRESH INDO COAL TO CHINA AND INDIA - FEARNRESEARCH
Handy
In the Atlantic, the Gulf remains firm for the next week with a few orders in the market. The Supramaxes are seeing around low 20k for fronth ...
Wednesday, 05 June 13
DON'T AVOID PAYING COAL ROYALTY TO THE GOVERNMENT - INDONESIAN ENERGY MINISTER
COALspot.com – “Every country has the right to make policies to protect their national interests”, Energy and Mineral Resources Mi ...
Tuesday, 04 June 13
NEWCASTLE PORT SHIPPED 2.56 MILLION TONS OF COAL IN A WEEK
COALspot.com - Newcastle port in Australia has loaded 2,563,596 tons of coal for week ended 0700 hours 3 June 2013, Newcastle Port Corp. said ...
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- Central Electricity Authority - India
- Heidelberg Cement - Germany
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- Asmin Koalindo Tuhup - Indonesia
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- Petron Corporation, Philippines
- Planning Commission, India
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- Eastern Coal Council - USA
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- Thiess Contractors Indonesia
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- Independent Power Producers Association of India
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- Commonwealth Bank - Australia
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- Parliament of New Zealand
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- Sindya Power Generating Company Private Ltd
- Merrill Lynch Commodities Europe
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- MS Steel International - UAE
- Mercator Lines Limited - India
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
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- Coalindo Energy - Indonesia
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- Offshore Bulk Terminal Pte Ltd, Singapore
- Anglo American - United Kingdom
- Bhoruka Overseas - Indonesia
- Dalmia Cement Bharat India
- New Zealand Coal & Carbon
- The Treasury - Australian Government
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- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- Port Waratah Coal Services - Australia
- Energy Link Ltd, New Zealand
- Maheswari Brothers Coal Limited - India
- International Coal Ventures Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
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- Mercuria Energy - Indonesia
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- Price Waterhouse Coopers - Russia
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- Ministry of Finance - Indonesia
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- Attock Cement Pakistan Limited
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- Chamber of Mines of South Africa
- Australian Commodity Traders Exchange
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Therma Luzon, Inc, Philippines
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
- Electricity Generating Authority of Thailand
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
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- Cement Manufacturers Association - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Indian Energy Exchange, India
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- White Energy Company Limited
- Marubeni Corporation - India
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
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- Indo Tambangraya Megah - Indonesia
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- TeaM Sual Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Bangladesh Power Developement Board
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- ASAPP Information Group - India
- Vizag Seaport Private Limited - India
- Mjunction Services Limited - India
- Kideco Jaya Agung - Indonesia
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- Simpson Spence & Young - Indonesia
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- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- Goldman Sachs - Singapore
- Romanian Commodities Exchange
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- Coastal Gujarat Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Formosa Plastics Group - Taiwan
- Barasentosa Lestari - Indonesia
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Kalimantan Lumbung Energi - Indonesia
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- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
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