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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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Wednesday, 14 January 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
In Oil we trust! The Barrel price has declined by almost a third in comparison to the 2014 January and has being on the downhill since early last s ...
Wednesday, 14 January 15
COMMODITIES AREN'T PRIMED FOR A REBOUND DURING 2015: SHIPPING COULD BENEFIT FROM LOWER PRICES - ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In the recent past, higher commodity prices were driven by an increase in demand from developing countries, which spelled good news for ship owners ...
Wednesday, 14 January 15
SUB-BIT FOB INDONESIA COAL SWAP FOR Q1 DELIVERY CLOSED AT US$ 46.97 PMT
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 declined month on month and week over week.
The Q1 swap has fell US$ 1.53 (-3.15 ...
Wednesday, 14 January 15
Q4' 15 FOB NEWCASTLE COAL SWAP CLOSED 4.51% LOWER COMPARED TO Q1' 15 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.56 per MT (-3.0%) month over month and US$ 1.03 (-2.0%) week ove ...
Tuesday, 13 January 15
MORE PITFALLS FOR OWNERS LOOKING TO TERMINATE FOR UNPAID HIRE - INCE & CO
KNOWLEDGE TO ELEVATE
It is a debatable point whether or not the obligation to pay hire under a time charter is a condition of the contract or ...
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- Binh Thuan Hamico - Vietnam
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- London Commodity Brokers - England
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Bharathi Cement Corporation - India
- ICICI Bank Limited - India
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Australian Coal Association
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Standard Chartered Bank - UAE
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- Carbofer General Trading SA - India
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- CNBM International Corporation - China
- Karbindo Abesyapradhi - Indoneisa
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Agrawal Coal Company - India
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- Star Paper Mills Limited - India
- Rio Tinto Coal - Australia
- MS Steel International - UAE
- Edison Trading Spa - Italy
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Simpson Spence & Young - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- PNOC Exploration Corporation - Philippines
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Energy Development Corp, Philippines
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- Ceylon Electricity Board - Sri Lanka
- Aditya Birla Group - India
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Parry Sugars Refinery, India
- Oldendorff Carriers - Singapore
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Bhatia International Limited - India
- OPG Power Generation Pvt Ltd - India
- Posco Energy - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Coalindo Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Price Waterhouse Coopers - Russia
- Marubeni Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- GN Power Mariveles Coal Plant, Philippines
- McConnell Dowell - Australia
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Heidelberg Cement - Germany
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Sojitz Corporation - Japan
- Alfred C Toepfer International GmbH - Germany
- IEA Clean Coal Centre - UK
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- Trasteel International SA, Italy
- South Luzon Thermal Energy Corporation
- GVK Power & Infra Limited - India
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Xindia Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Minerals Council of Australia
- Dalmia Cement Bharat India
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- Anglo American - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
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