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Friday, 28 March 14
CHINA'S ENVIRONMENTAL MEASURES WILL NOT CURB GROWTH IN DOMESTIC STEEL PRODUCTION AND SEABORNE IRON ORE - WOOD MACKENZIE SAYS
 Steel plants in China have been targeted as a major source of the toxic smog enveloping Beijing and Shanghai. Emergency measures have been imposed on regional steelmakers with mills in Tangshan ordered to suspend at least 30% of production and idle coke batteries and sintering operations. Longer term measures include the introduction of more stringent emission controls. Wood Mackenzie notes that although this move has created market wariness for China steel production and iron ore demand, the impact on steel production will be minimal. This is because there is plenty of unused capacity within China's steel industry ready to replace any lost production, due to shut downs resulting from enforcement of the new emissions regulations. However, improving the environmental performance of Chinese steel plants will add further cost pressure to an already ailing industry. Mr Paul Gray, Principal Iron Ore Markets Analyst at Wood Mackenzie says, "The iron ore market is understandably spooked by what's going on in China due to the introduction of the environmental controls and their potential financial impact on the steel industry. This has sparked much uncertainty and speculation. This is one factor that has caused price volatility, with prices plunging to 17 month lows in recent weeks before picking up again very recently. However, during the remainder of 2014 we expect that fighting emissions will have negligible impact on total Chinese crude steel production and limited impact on iron ore demand in terms of quantity, with Chinese imports of iron ore predicted to rise by a further 90 million tonnes (Mt) in 2014 to a record 921Mt."
Dr He Ming, Steel Cost Consultant at Wood Mackenzie, adds, "Steel companies need to put emissions control measures in place. However, given that most Chinese plants are tight on capital after years of near-zero margins, they will struggle with the additional costs required to implement the necessary measures and many companies will be looking for a way to pass the cost onto consumers." To achieve emissions levels on a par with their counterparts in Japan or South Korea, most steel plants would have to invest and incur more than RMB 50-60/t (US$8.3-10/t) of additional operating cost, further eroding their already narrow margins. This comes following the announcement that the average net profit margin at steelmakers in 2013 was just over 0.64% for 86 of China Iron and Steel Association's (CISA) key steel enterprises.
If steel companies are unable to meet the new lower emissions targets, they may be forced to temporarily or even permanently shut production but Wood Mackenzie expects the targets will have more impact on small scale non-CISA steel plants. These smaller plants have outdated emissions control facilities and are estimated to have emission levels three to four times higher than their CISA counterparts. Dr He says, "Non-CISA steel plants contributed to less than 20% of China's steel production in 2013 therefore although an aggressive plan of capacity closures has been announced by the central and local governments, the scale of closures is expected to have a limited impact on a steel industry that is suffering from chronic overcapacity."
"Additionally, most of the announced closures to date have been for capacity already idled or curtailed for other reasons, with the lost production picked up by the larger steel plants. It is unlikely that we will see forced closures amongst the larger plants as this move will not reduce emissions significantly. Moreover, it will have a detrimental effect on local economies by creating large numbers of unemployed workers and unpaid debts. This is not ideal, especially since Xi Jinping's government is encouraging a market-based economy with increased domestic consumer power. Therefore we do not expect closures of the larger scale plants to be the next step enforced."
With the concept that environmental regulations will apply to each steel plant fairly, regardless of size or whether it is privately or state-owned, this would shift the entire Chinese steel industry cost curve higher and further erode margins. It is therefore likely that these incremental cost increases will be passed on to end users. Moreover, since sintering is the most polluting process within a steel plant, some plants will look to replace sinter rather than incur the additional operating costs required to meet new emissions standards. Sintering is responsible for 80%-90% of total dust and soot emissions and more than 60% of total sulfur emissions from the steel industry.
Wood Mackenzie anticipates that replacements for the sintering process will result in an increase in demand for the more expensive, higher quality and environmentally-friendly raw materials like iron ore lump and pellet; supporting higher premiums for these products. There will be a natural cap on how much capacity can be switched away from sinter to higher quality feed as the price premium will become equal to the additional cost of implementing the necessary environmental measures.
The limited impact on steel production accounts for the minimal consequences for iron ore demand. Mr Gray adds, "Of longer term significance is the seaborne market's anticipated transition as it moves towards a position of excess supply capability when Chinese demand struggles to absorb all the additional seaborne supply earmarked for the this year and next. 2014 will certainly be a transition year for iron ore but we think this is not necessarily related to China's environmental measures it's more symptomatic of rising Australian supply and slowing Chinese demand."
Dr He concludes, "Government and steel companies will need to work together to protect the industry while still gradually improving emissions. On the company-side, we expect China's larger steel plants will take alternative measures to meet environmental requirements but they will incur extra costs of implementing emissions control facilities in the longer term. On the government side, a more effective way to curb pollution is to improve monitoring methods at individual plants. This will enable the government to impose heavy fines on those with emissions beyond a well-defined threshold, while incentivising those with lesser emission levels by offering subsidies to offset extra costs incurred."
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, 22 November 23
INDIA: GOVERNMENT PLANS 1.4 BILLION TONNE COAL OUTPUT BY 2027 - LIVEMINT
The Union coal ministry on Monday announced plans to increase India’s coal production to 1.404 billion tonne by 2027, with an eye to further ...
Wednesday, 22 November 23
OBLIGATION. INDONESIA AIMS TO START COLLECTING LEVIES FROM COAL MINERS IN JANUARY - REUTERS
Indonesia plans to start collecting levies from coal miners in January to be used to compensate miners who sell coal to the state utility at lower ...
Tuesday, 21 November 23
INDIAN COAL POWER PLANTS’ CAPACITY UTILISATION WILL IMPROVE TO 65% THIS FISCAL: - CRISIL
Coal-based thermal power units’ plant load factor (PLF) or capacity utilisation will improve to 65 percent in the current fiscal year despite ...
Tuesday, 14 November 23
CAPITAL PRODUCT PARTNERS L.P. ANNOUNCES TRANSFORMATIVE TRANSACTION INCLUDING THE ACQUISITION OF 11 NEWBUILD LNG CARRIERS FOR $3.1 BILLION
Capital Product Partners L.P. announced that it has entered into an umbrella agreement (the “Umbrella Agreement”) with Capital Maritime ...
Tuesday, 14 November 23
COAL INDIA BEATS Q2 PROFIT VIEW ON HIGH POWER DEMAND AMID WEAK MONSOON - REUTERS
Coal India on Friday reported better-than-expected second-quarter profit, helped by high power demand and boosted production amid a weak monsoon.
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- Baramulti Group, Indonesia
- Mjunction Services Limited - India
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Petrochimia International Co. Ltd.- Taiwan
- PNOC Exploration Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Miang Besar Coal Terminal - Indonesia
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Indo Tambangraya Megah - Indonesia
- OPG Power Generation Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Rio Tinto Coal - Australia
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Orica Mining Services - Indonesia
- New Zealand Coal & Carbon
- Electricity Generating Authority of Thailand
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Attock Cement Pakistan Limited
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- Wilmar Investment Holdings
- The University of Queensland
- Thai Mozambique Logistica
- Minerals Council of Australia
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Medco Energi Mining Internasional
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Karaikal Port Pvt Ltd - India
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- Energy Development Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Deloitte Consulting - India
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- London Commodity Brokers - England
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Kepco SPC Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Heidelberg Cement - Germany
- Singapore Mercantile Exchange
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- Commonwealth Bank - Australia
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- Ministry of Finance - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Indonesian Coal Mining Association
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Malabar Cements Ltd - India
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Kapuas Tunggal Persada - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bayan Resources Tbk. - Indonesia
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Borneo Indobara - Indonesia
- GVK Power & Infra Limited - India
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- ICICI Bank Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Renaissance Capital - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Straits Asia Resources Limited - Singapore
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- South Luzon Thermal Energy Corporation
- Coal and Oil Company - UAE
- Essar Steel Hazira Ltd - India
- PTC India Limited - India
- Bangladesh Power Developement Board
- Australian Commodity Traders Exchange
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Orica Australia Pty. Ltd.
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Indika Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Posco Energy - South Korea
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Anglo American - United Kingdom
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Mercator Lines Limited - India
- Directorate General of MIneral and Coal - Indonesia
- CNBM International Corporation - China
- Ministry of Transport, Egypt
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- White Energy Company Limited
- Planning Commission, India
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- Romanian Commodities Exchange
- Alfred C Toepfer International GmbH - Germany
- Therma Luzon, Inc, Philippines
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- AsiaOL BioFuels Corp., Philippines
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Australian Coal Association
- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
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