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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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Monday, 31 March 14
CFR SOUTH CHINA COAL SWAP FOR Q2 14 DELIVERY LOST 1.17% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.17 percent month on month and closed at US$ 75.38 per m ...
Sunday, 30 March 14
FREIGHTS FROM INDONESIA TO INDIA IS EXPECTED TO BE SOFT NEXT WEEK - REDDY
COALspot.com: The freight market dropped drastically and all sectors were affected severely.
The BDI was down by 14.13 pct and closed at 1, ...
Friday, 28 March 14
US PRODUCED APPROXIMATELY 18.9 MMST IN A WEEK - EIA
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Thursday, 27 March 14
PANAMAX : SEEMS TO HEAD FURTHER DOWN; CAPESIZE : ANOTHER CHOPPY AND UNPREDICTABLE WEEK - FEARNLEYS AS
Handy
A weaker sentiment for the smaller size as well, with reduced activity in the Atlantic where Owners have to face significantly lower ret ...
Wednesday, 26 March 14
NEWBUILDING ORDERING ACTIVITY PICKS UP PACE ON IMPROVING DRY BULK MARKET CONDITIONS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The gradual improvement of the dry bulk market, as expected for some time now, is urging shipowners to increase their newbuilding ordering activ ...
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- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Interocean Group of Companies - India
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- OPG Power Generation Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- PowerSource Philippines DevCo
- Baramulti Group, Indonesia
- Aboitiz Power Corporation - Philippines
- Wilmar Investment Holdings
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- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
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- Meralco Power Generation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Goldman Sachs - Singapore
- Parliament of New Zealand
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- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- Semirara Mining Corp, Philippines
- Independent Power Producers Association of India
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
- Kobexindo Tractors - Indoneisa
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Aditya Birla Group - India
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Eastern Energy - Thailand
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Directorate Of Revenue Intelligence - India
- Latin American Coal - Colombia
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Gujarat Sidhee Cement - India
- Electricity Authority, New Zealand
- Sojitz Corporation - Japan
- Bukit Makmur.PT - Indonesia
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Sree Jayajothi Cements Limited - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- ASAPP Information Group - India
- Altura Mining Limited, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Kapuas Tunggal Persada - Indonesia
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- Energy Development Corp, Philippines
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- Posco Energy - South Korea
- Georgia Ports Authority, United States
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Medco Energi Mining Internasional
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Oldendorff Carriers - Singapore
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Videocon Industries ltd - India
- Standard Chartered Bank - UAE
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Anglo American - United Kingdom
- Larsen & Toubro Limited - India
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Petron Corporation, Philippines
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Indonesian Coal Mining Association
- Vedanta Resources Plc - India
- Energy Link Ltd, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Cement Manufacturers Association - India
- Tamil Nadu electricity Board
- Planning Commission, India
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- Power Finance Corporation Ltd., India
- Bukit Baiduri Energy - Indonesia
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- Economic Council, Georgia
- Ministry of Mines - Canada
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
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