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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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Monday, 02 February 15
INDONESIA'S ADARO ENERGY PRODUCED 56.21 MILLION TONNES OF COAL IN 2014; UP 8% Y-O-Y
COALspot.com: PT. Adaro Energy, Indonesia’s largest coal producer, has increased coal production by 8% to 56.21 million tonnes (Mt) from both ...
Monday, 02 February 15
API 8 CFR SOUTH CHINA COAL SWAP PICKS UP W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined US$ 0.81 (-1.36%) per MT month over month and gained US$ 0.18&nb ...
Monday, 02 February 15
SOUTH KOREA'S KOMIPO INVITES BIDS FOR 280K MT OF SUB-BITUMINOUS COAL
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 280,000 MT of Sub-bituminous coal coa ...
Sunday, 01 February 15
INDONESIA-TO-INDIA COAL FREIGHT RATES REMAIN WEAK NEXT WEEK
COALspot.com: The BDI continued its fall reached lowest levels since 1986 this week.
The BDI declined 15.55 pct to 608 points on Friday 30, Ja ...
Friday, 30 January 15
CONTANGO AND TANKERS - SKULD
KNOWLEDGE TO ELEVATE
Like an invitation to a dance, the word contango may have some people flustered, but for tanker owners this market phenome ...
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- Vedanta Resources Plc - India
- Australian Coal Association
- Indian Energy Exchange, India
- Heidelberg Cement - Germany
- AsiaOL BioFuels Corp., Philippines
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Bhushan Steel Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Mercator Lines Limited - India
- Indika Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Savvy Resources Ltd - HongKong
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Gujarat Sidhee Cement - India
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Indo Tambangraya Megah - Indonesia
- Electricity Generating Authority of Thailand
- TNB Fuel Sdn Bhd - Malaysia
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Petron Corporation, Philippines
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Ministry of Mines - Canada
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- The University of Queensland
- Sojitz Corporation - Japan
- Sical Logistics Limited - India
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Parliament of New Zealand
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Independent Power Producers Association of India
- Chettinad Cement Corporation Ltd - India
- Marubeni Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Rio Tinto Coal - Australia
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- Indonesian Coal Mining Association
- Goldman Sachs - Singapore
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- Bayan Resources Tbk. - Indonesia
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sarangani Energy Corporation, Philippines
- GMR Energy Limited - India
- LBH Netherlands Bv - Netherlands
- Gujarat Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Barasentosa Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Commodity Traders Exchange
- Toyota Tsusho Corporation, Japan
- Edison Trading Spa - Italy
- Latin American Coal - Colombia
- Coal and Oil Company - UAE
- Posco Energy - South Korea
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Trasteel International SA, Italy
- Uttam Galva Steels Limited - India
- GVK Power & Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Thiess Contractors Indonesia
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- White Energy Company Limited
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- SMC Global Power, Philippines
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Banpu Public Company Limited - Thailand
- Salva Resources Pvt Ltd - India
- Bhatia International Limited - India
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Coalindo Energy - Indonesia
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Videocon Industries ltd - India
- Attock Cement Pakistan Limited
- ASAPP Information Group - India
- MS Steel International - UAE
- Pendopo Energi Batubara - Indonesia
- Wilmar Investment Holdings
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sakthi Sugars Limited - India
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Alfred C Toepfer International GmbH - Germany
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Antam Resourcindo - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
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