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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, 13 January 15
Q2 CFR SOUTH CHINA COAL SWAP DECLINED 8.66% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined by US$ 3.48 (-5.73%) month over month and US$ 2.35 (-3.94%) week ...
Tuesday, 13 January 15
Q1' 2015 RICHARDS BAY COAL SWAP SLIGHTLY HIGHER THAN Q2 & Q4 2015 SWAPS
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 7.21 ...
Monday, 12 January 15
COAL: LOW PRICES ARE EXPECTED TO DRIVE A SUPPLY-DRIVEN RECOVERY IN THE MEDIUM TERM - SGX
COALspot.com: Thermal coal prices dropped to six-year lows in 2014 driven by persistent oversupply, SGX says in its “ Commodities 2014 - A ye ...
Monday, 12 January 15
FREIGHT MARKET: 2015 FLEET SUPPLY GROWTH IS EXPECTED TO REMAIN SLIGHTLY AHEAD OF CARGO GROWTH - SGX
COALspot.com: The dry bulk freight market was forced to digest a number of negatives in 2014 leading the Baltic Dry Index to fall 66% through the y ...
Monday, 12 January 15
SHIPPING - CHALLENGES AND RESOLUTIONS - EVA TZIMA
Last year has without a doubt been another challenging one both for both our industry and our country. As Greece is currently dominated by election ...
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- Eastern Coal Council - USA
- Miang Besar Coal Terminal - Indonesia
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- MS Steel International - UAE
- IHS Mccloskey Coal Group - USA
- Tata Chemicals Ltd - India
- Economic Council, Georgia
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Grasim Industreis Ltd - India
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Mintek Dendrill Indonesia
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- Chettinad Cement Corporation Ltd - India
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Georgia Ports Authority, United States
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Malabar Cements Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- VISA Power Limited - India
- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- European Bulk Services B.V. - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- PowerSource Philippines DevCo
- Global Green Power PLC Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- ICICI Bank Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Iligan Light & Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- Petron Corporation, Philippines
- Star Paper Mills Limited - India
- Trasteel International SA, Italy
- White Energy Company Limited
- Maheswari Brothers Coal Limited - India
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- Madhucon Powers Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Indogreen Group - Indonesia
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Energy Development Corp, Philippines
- PTC India Limited - India
- Indo Tambangraya Megah - Indonesia
- Riau Bara Harum - Indonesia
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Carbofer General Trading SA - India
- Meenaskhi Energy Private Limited - India
- Australian Coal Association
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Manunggal Multi Energi - Indonesia
- ASAPP Information Group - India
- Kideco Jaya Agung - Indonesia
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Gujarat Mineral Development Corp Ltd - India
- SMC Global Power, Philippines
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Semirara Mining and Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Dalmia Cement Bharat India
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Rashtriya Ispat Nigam Limited - India
- Toyota Tsusho Corporation, Japan
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Meralco Power Generation, Philippines
- Planning Commission, India
- Bukit Makmur.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Kumho Petrochemical, South Korea
- India Bulls Power Limited - India
- Ministry of Transport, Egypt
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Power Finance Corporation Ltd., India
- Deloitte Consulting - India
- Minerals Council of Australia
- Sical Logistics Limited - India
- Parliament of New Zealand
- Leighton Contractors Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- GVK Power & Infra Limited - India
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- CNBM International Corporation - China
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Standard Chartered Bank - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Edison Trading Spa - Italy
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Aditya Birla Group - India
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Thiess Contractors Indonesia
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