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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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Sunday, 18 January 15
INDONESIA TO INDIA SUPRAMAX FREIGHT RATES ARE EXPECTED TO REMAIN WEAK NEXT WEEK
COALspot.com: The BDI was up 4.51 pct week on week on Friday 16, January 2015. The BDI closed at 741 points on this Friday after gaining arou ...
Friday, 16 January 15
U.S. WEEKLY COAL PRODUCTION UP 7.3% W-O-W
COALspot.com – United States the world's one of the largest coal producers, produced approximately 18.9 million short tons (mmst) of coal ...
Thursday, 15 January 15
PANAMAX : MARKET CONTINUE ON LOW PACE - FEARNLEYS
Handy
On a general basis we can say that rates are softening in both hemispheres. Although for some specific trades we can see premiums being ach ...
Thursday, 15 January 15
LOW CASH COSTS, GOOD LIQUIDITY HELP ASIAN OIL COMPANIES IN PRICE ROUT - FITCH
Fitch Ratings says that rated oil and gas production companies in Asia can comfortably operate under low oil prices for some time given their gener ...
Wednesday, 14 January 15
DRY BULK MARKET NOTED ANOTHER WEEKLY DECLINE - INTERMODAL
COALspot.com: The Dry bulk market noted another weekly decline on Friday, with the performance of the Capesize market still weighing down on the re ...
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- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Semirara Mining Corp, Philippines
- SMC Global Power, Philippines
- Thai Mozambique Logistica
- Alfred C Toepfer International GmbH - Germany
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Independent Power Producers Association of India
- OPG Power Generation Pvt Ltd - India
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Bhoruka Overseas - Indonesia
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Indian Energy Exchange, India
- Krishnapatnam Port Company Ltd. - India
- Pendopo Energi Batubara - Indonesia
- Karaikal Port Pvt Ltd - India
- MS Steel International - UAE
- Straits Asia Resources Limited - Singapore
- Singapore Mercantile Exchange
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Orica Australia Pty. Ltd.
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Power Finance Corporation Ltd., India
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- Timah Investasi Mineral - Indoneisa
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- Bhushan Steel Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- Altura Mining Limited, Indonesia
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Marubeni Corporation - India
- Pipit Mutiara Jaya. PT, Indonesia
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Jaiprakash Power Ventures ltd
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Australian Coal Association
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Larsen & Toubro Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Borneo Indobara - Indonesia
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Manunggal Multi Energi - Indonesia
- Planning Commission, India
- Trasteel International SA, Italy
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Cigading International Bulk Terminal - Indonesia
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- Kartika Selabumi Mining - Indonesia
- PowerSource Philippines DevCo
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indonesian Coal Mining Association
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Interocean Group of Companies - India
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- Cement Manufacturers Association - India
- Gujarat Sidhee Cement - India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Indo Tambangraya Megah - Indonesia
- Vedanta Resources Plc - India
- Kideco Jaya Agung - Indonesia
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Malabar Cements Ltd - India
- White Energy Company Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- Central Java Power - Indonesia
- ASAPP Information Group - India
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- IEA Clean Coal Centre - UK
- Semirara Mining and Power Corporation, Philippines
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Meenaskhi Energy Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- SMG Consultants - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- VISA Power Limited - India
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Renaissance Capital - South Africa
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- PTC India Limited - India
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- Aditya Birla Group - India
- Coastal Gujarat Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- International Coal Ventures Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Iligan Light & Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Ministry of Transport, Egypt
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- Port Waratah Coal Services - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Kapuas Tunggal Persada - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
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