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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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Thursday, 05 February 15
ULTRAMAX LEVELS FROM INDIA TO CHINA IN THE MID US$ 5000'S - FEARNLEYS AS
Handy
Despite the overall weak sentiment, there is a scent of optimism in the Atlantic market for ppt dates. Continent is still struggling with o ...
Wednesday, 04 February 15
MARKET INSIGHT - LINOS KOGEVINAS
It has been just about over 2 months since, in a move that surprised many and caused widespread apprehension, OPEC decided to maintain its producti ...
Tuesday, 03 February 15
Q1'15 FOB INDONESIA COAL SWAP CLOSED $ 3.29 HIGHER COMPARED TO Q4'15 DELIVERY PRICE
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 rose week over week and month on month.
The Q1 swap up US$ 0.68 (+1.41%) month o ...
Tuesday, 03 February 15
FOB NEWCASTLE COAL SWAP FOR Q4 DELIVERY CLOSED 5.86% LOWER THAN Q1 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery rose US$ 0.26 per MT (+0.51%) week over week and declined US$ 0.02 (-0.04%) ...
Monday, 02 February 15
API 4 FOB RICHARDS BAY COAL SWAP ROSE WEEK OVER WEEK
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 declined month over month and day on day.
The Q1 swap has decli ...
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- Indika Energy - Indonesia
- Bhatia International Limited - India
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Power Finance Corporation Ltd., India
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Deloitte Consulting - India
- Chamber of Mines of South Africa
- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
- Interocean Group of Companies - India
- Timah Investasi Mineral - Indoneisa
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Coal and Oil Company - UAE
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Trasteel International SA, Italy
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- PNOC Exploration Corporation - Philippines
- Indogreen Group - Indonesia
- White Energy Company Limited
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Coal Council - USA
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- Iligan Light & Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Bangladesh Power Developement Board
- AsiaOL BioFuels Corp., Philippines
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- GN Power Mariveles Coal Plant, Philippines
- SMG Consultants - Indonesia
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Borneo Indobara - Indonesia
- ASAPP Information Group - India
- Bulk Trading Sa - Switzerland
- Port Waratah Coal Services - Australia
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Posco Energy - South Korea
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Xindia Steels Limited - India
- Cement Manufacturers Association - India
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Commonwealth Bank - Australia
- Kobexindo Tractors - Indoneisa
- Coastal Gujarat Power Limited - India
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Standard Chartered Bank - UAE
- Indian Energy Exchange, India
- Kaltim Prima Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- SN Aboitiz Power Inc, Philippines
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- SMC Global Power, Philippines
- MS Steel International - UAE
- Kartika Selabumi Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Sree Jayajothi Cements Limited - India
- Bharathi Cement Corporation - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Orica Mining Services - Indonesia
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- Ceylon Electricity Board - Sri Lanka
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Sical Logistics Limited - India
- The University of Queensland
- Jorong Barutama Greston.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- London Commodity Brokers - England
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Coalindo Energy - Indonesia
- Australian Commodity Traders Exchange
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Vizag Seaport Private Limited - India
- LBH Netherlands Bv - Netherlands
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
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