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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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Tuesday, 27 January 15
Q1 FOB INDONESIA COAL SWAP CLOSED AT $ 47.87 FOR WEEK ENDING JAN. 23
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 gain week over week and declined month on month.
The Q1 swap has decline US$ 0.9 ...
Tuesday, 27 January 15
Q2 FOB NEWCASTLE COAL SWAP UP 4.5% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery declined US$ 0.28 per MT (-0.54%) month over month and increased US$ 1.23 ( ...
Monday, 26 January 15
OVERSUPPLY, AMPLE STOCKPILES, AND LACKLUSTER UNDERLYING STEEL DEMAND KEPT COKING COAL PRICES LOW IN 2014
COALspot.com: Coking coal prices (FOB & CFR) fell 15% and 18% respectively during the year, amidst persistent oversupply, ample inventory and s ...
Monday, 26 January 15
FOB RICHARDS BAY Q2 COAL SWAP CLOSED LOWER THAN Q1 CLOSING
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 fell ...
Monday, 26 January 15
API 8 CFR SOUTH CHINA COAL SWAP CONTINUE TO SLIDE M-O-M; ROSE W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined US$ 0.79 (-1.33%) per MT month over month and gained US$ 2.10&nb ...
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- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- Kobexindo Tractors - Indoneisa
- Indonesian Coal Mining Association
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Toyota Tsusho Corporation, Japan
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Parliament of New Zealand
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Singapore Mercantile Exchange
- South Luzon Thermal Energy Corporation
- Antam Resourcindo - Indonesia
- Commonwealth Bank - Australia
- Star Paper Mills Limited - India
- Semirara Mining and Power Corporation, Philippines
- McConnell Dowell - Australia
- Vedanta Resources Plc - India
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Intertek Mineral Services - Indonesia
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- Orica Australia Pty. Ltd.
- Tata Chemicals Ltd - India
- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Gujarat Sidhee Cement - India
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Bhatia International Limited - India
- Salva Resources Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement PLC, Thailand
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Baramulti Group, Indonesia
- Renaissance Capital - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- India Bulls Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- GN Power Mariveles Coal Plant, Philippines
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Grasim Industreis Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- PTC India Limited - India
- IEA Clean Coal Centre - UK
- Directorate General of MIneral and Coal - Indonesia
- Samtan Co., Ltd - South Korea
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- Australian Coal Association
- Holcim Trading Pte Ltd - Singapore
- Ministry of Finance - Indonesia
- Trasteel International SA, Italy
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Larsen & Toubro Limited - India
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- New Zealand Coal & Carbon
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Standard Chartered Bank - UAE
- Deloitte Consulting - India
- Bukit Baiduri Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sarangani Energy Corporation, Philippines
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Central Electricity Authority - India
- PetroVietnam Power Coal Import and Supply Company
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Cement Manufacturers Association - India
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Coastal Gujarat Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- Aditya Birla Group - India
- Mercator Lines Limited - India
- ASAPP Information Group - India
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Dalmia Cement Bharat India
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- MS Steel International - UAE
- Manunggal Multi Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Makarim & Taira - Indonesia
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- AsiaOL BioFuels Corp., Philippines
- Australian Commodity Traders Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Energy Link Ltd, New Zealand
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Aboitiz Power Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
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