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Thursday, 29 January 15
CHINA ENERGY DEMAND MUST BE REVIEWED DUE TO FUNDAMENTAL ECONOMIC CHANGES - WOOD MACKENZIE
 New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
Wood Mackenzie says 2014 was a significant year for China as economic rebalancing led demand growth - for a range of major energy commodities - and GDP growth decoupled significantly for the first time. Over the past two decades, commodity demand growth had maintained relatively proportionate annual increases to GDP growth. In 2014 however the pace of power, gas, coal and diesel demand increase fell more drastically than the slight GDP moderation, beyond expectations. Wood Mackenzie expects gas demand will recover in one to two years as the key drivers of slower growth are mainly cyclical but power, coal and diesel demand will see their outlook change notably over the long-term due to major structural changes in the economy and policy. Global energy sector will need to identify which changes are structural or cyclical in to determine future demand patterns and opportunities.
China's GDP grew by 7.4% in 2014 compared to 7.7% in 2013, a modest decline. Meanwhile, compared to 2013 power demand growth fell by almost half; Gas demand growth fell by more than 8%-point; Coal demand barely grew; and Diesel demand actually contracted for the first time in more than a decade. (refer to chart). Ms Cynthia Lim, Principal Asia Economist for Wood Mackenzie says, "7.4% is still a large year-on-year GDP increase for any economy so this fall in commodity demand is counter-intuitive and we have only seen the tip of the iceberg. The Chinese government is moving away from the post-2008 investment binge and gradually moving towards a more moderate but sustainable consumption-led economic growth. There are two aspects of rebalancing: one, away from investment towards consumption, particularly in the developed coastal region; and two, a shift in economic gravity away from the coast and towards the inland region. Both trends will have significant implications on commodity demand shifts. An important indicator for the energy industry to watch will be the weakness of industry versus the strength of the consumer in China."
The research company expects Industrial recovery and related investment will remain subdued in 2015-2016 but should see robust growth through the medium-term supported by urbanisation. Key sectors such as coal and steel are weighed down by overcapacity, tighter environmental regulations and the property market slowdown. While the government has relaxed both house purchase restrictions and credit conditions through 2014, recovery in real estate will be slow as inventory levels remain high and potential buyers stay on the side line due to market uncertainty.
Wood Mackenzie analyses which sectors will be most affected in the near-term (one to two years), medium term (two to seven years) and long-term (over eight years):
Power - Sustained change due to economic rebalancing
The short-term weakness in the industrial sector will continue to subdue power demand growth, especially as high inventory levels are reduced. Mr Gavin Thompson, Principal Analyst for APAC Gas & Power research says, "Industrial output will eventually recover from overcapacity and weak demand but China's rebalancing away from industry to the service sector will have a longer-term structural impact. In tandem with the geographic rebalancing of China's economy, regional power patterns will also change with higher demand growth concentrated in the western provinces where industrialisation processes are focused, compared to coastal markets." Wood Mackenzie forecasts that power demand year-on-year in the western regions will rise at around twice the pace of coastal markets through the medium term of 2-7 years, with significant implications for capacity and fuel choices.
Coal - Remains king but impacted by structural lower power demand growth
The pace of annual coal demand growth slowed to 4-5% in 2012 and 2013 from (what the previous year), particularly in coastal markets with near-zero growth in demand for power generation. However, Mr Thompson asserts, "Coal remains king in China but growth has been severely reduced, due to industrial weakness as well as cyclical weather patterns that saw higher rainfall boost hydro output. Through the short-term, coal-fired generation will likely be muted by lower power demand, environmental policies and a rise in non-coal generation including hydro. Longer-term , coal demand pace and patterns will be impacted by structural changes, with demand rising fastest from inland provinces and the acceleration of ultra high voltage (UHV) transmission lines to export power to the coast."
Gas - demand growth will rebound but cyclical low oil prices and weather will cause near-term pain
Over the past decade gas demand in China increased by 16% a year on average between 2004-2013. Last year however, gas demand growth slowed notably from over 13% in 2013 to around 8% in 2014. Mr Thompson explains, "This was influenced more by cyclical factors. In addition to slowing GDP growth, evolving environmental policies, higher hydro output, mild winter weather in northern China and high domestic gas prices relative to oil were key factors that saw gas demand growth fall sharply. In 2015, the government's decision on domestic gas price reform will be a key influence on demand. While we expect domestic demand growth over the next few years to return to historic levels, a swift return to double-digit growth may not be achievable without lower city gate gas prices."
Oil products - weaker diesel demand outlook to stay
2014 was the fourth straight year of a decoupling relationship between China's GDP and oil demand growth as the effects of the 2009 stimulus began to fade. However, growth in oil demand has varied by oil product since then given each product's distinct drivers: Diesel demand is estimated to have contracted 0.7% in 2014 as commercial transportation demand reduced. Mr Thompson explains, "We believe we are now witnessing a structural change in China's diesel demand as the economy rebalances away from heavy industry. In contrast, gasoline demand, which reflects personal car ownership, maintained a robust growth of 8% in 2014. Healthy growth momentum for gasoline demand will likely be sustained as the economy shifts further towards consumption."
Ms Lim concludes, "The rebalancing of China's economy will play an important role in shaping the energy demand outlook for 2015 and beyond. We believe a recovery in demand for power, coal and diesel in particular is closely tied to the industrial demand outlook. While these commodities will experience a moderate recovery in the medium term as over-capacity is reduced, the on-going transition of China's economy away from an industry-led model suggests their relationship with GDP growth will weaken permanently in the longer-run. As a result, the energy sector must keep attuned to both China's underlying changes and also shorter-term developments to position it for the changing opportunities the market offers."
About Wood Mackenzie
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
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- Central Electricity Authority - India
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- Timah Investasi Mineral - Indoneisa
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Marubeni Corporation - India
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- The State Trading Corporation of India Ltd
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Leighton Contractors Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Trasteel International SA, Italy
- Australian Commodity Traders Exchange
- Holcim Trading Pte Ltd - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Karaikal Port Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Jindal Steel & Power Ltd - India
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- GMR Energy Limited - India
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Rio Tinto Coal - Australia
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- Xindia Steels Limited - India
- Romanian Commodities Exchange
- The University of Queensland
- Thai Mozambique Logistica
- Global Business Power Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Interocean Group of Companies - India
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Attock Cement Pakistan Limited
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- The Treasury - Australian Government
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Parry Sugars Refinery, India
- Orica Mining Services - Indonesia
- SMC Global Power, Philippines
- LBH Netherlands Bv - Netherlands
- Metalloyd Limited - United Kingdom
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Grasim Industreis Ltd - India
- Australian Coal Association
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Kobexindo Tractors - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Merrill Lynch Commodities Europe
- Bayan Resources Tbk. - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- Ceylon Electricity Board - Sri Lanka
- Heidelberg Cement - Germany
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Savvy Resources Ltd - HongKong
- TeaM Sual Corporation - Philippines
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Pendopo Energi Batubara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
- Billiton Holdings Pty Ltd - Australia
- PTC India Limited - India
- Singapore Mercantile Exchange
- London Commodity Brokers - England
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- SMG Consultants - Indonesia
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Riau Bara Harum - Indonesia
- Gujarat Sidhee Cement - India
- European Bulk Services B.V. - Netherlands
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Manunggal Multi Energi - Indonesia
- Minerals Council of Australia
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- OPG Power Generation Pvt Ltd - India
- Latin American Coal - Colombia
- Ind-Barath Power Infra Limited - India
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- International Coal Ventures Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Sojitz Corporation - Japan
- VISA Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- Ministry of Transport, Egypt
- India Bulls Power Limited - India
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- PNOC Exploration Corporation - Philippines
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Carbofer General Trading SA - India
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Agrawal Coal Company - India
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- Energy Link Ltd, New Zealand
- Bharathi Cement Corporation - India
- MS Steel International - UAE
- Energy Development Corp, Philippines
- Banpu Public Company Limited - Thailand
- Orica Australia Pty. Ltd.
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
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