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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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Friday, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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Showing 11 to 15 news of total 6871 |
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- Binh Thuan Hamico - Vietnam
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- GVK Power & Infra Limited - India
- Aditya Birla Group - India
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Mjunction Services Limited - India
- Sojitz Corporation - Japan
- Eastern Energy - Thailand
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Agrawal Coal Company - India
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Siam City Cement - Thailand
- Neyveli Lignite Corporation Ltd, - India
- Coalindo Energy - Indonesia
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- VISA Power Limited - India
- Mercator Lines Limited - India
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- McConnell Dowell - Australia
- San Jose City I Power Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Trasteel International SA, Italy
- Africa Commodities Group - South Africa
- The University of Queensland
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- SMG Consultants - Indonesia
- Australian Commodity Traders Exchange
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Indian Energy Exchange, India
- Malabar Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Minerals Council of Australia
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Latin American Coal - Colombia
- PTC India Limited - India
- Coal and Oil Company - UAE
- Kapuas Tunggal Persada - Indonesia
- Marubeni Corporation - India
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Vizag Seaport Private Limited - India
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Indian Oil Corporation Limited
- Parry Sugars Refinery, India
- Mercuria Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Cement Manufacturers Association - India
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- Kobexindo Tractors - Indoneisa
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- SN Aboitiz Power Inc, Philippines
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- GMR Energy Limited - India
- Oldendorff Carriers - Singapore
- Chamber of Mines of South Africa
- Indogreen Group - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Tata Chemicals Ltd - India
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- GAC Shipping (India) Pvt Ltd
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- Meralco Power Generation, Philippines
- Holcim Trading Pte Ltd - Singapore
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- Bhatia International Limited - India
- Siam City Cement PLC, Thailand
- Sindya Power Generating Company Private Ltd
- Pendopo Energi Batubara - Indonesia
- Larsen & Toubro Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Borneo Indobara - Indonesia
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- Videocon Industries ltd - India
- Coastal Gujarat Power Limited - India
- Port Waratah Coal Services - Australia
- Sical Logistics Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Tamil Nadu electricity Board
- Karaikal Port Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Mintek Dendrill Indonesia
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Xindia Steels Limited - India
- Romanian Commodities Exchange
- Economic Council, Georgia
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Parliament of New Zealand
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Heidelberg Cement - Germany
- Jindal Steel & Power Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- SMC Global Power, Philippines
- Directorate Of Revenue Intelligence - India
- Thiess Contractors Indonesia
- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- Samtan Co., Ltd - South Korea
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
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