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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, 11 January 15
BDI DECLINED 8% ON WEEK; BCI LOST 31%
COALspot.com: The BDI continued its decline in the first week of this year or lost 8 pct week over week. The BDI was closed at 709 points whi ...
Friday, 09 January 15
U.S. EASTERN SPOT STEAM COAL PRICES FELL IN 2014; ROSE IN WEST - EIA
U.S. Eastern spot steam coal prices declined in 2014 compared to 2013 levels because of a decline in steam coal exports.
According to U.S. Ene ...
Friday, 09 January 15
WEEKLY U.S. COAL PRODUCTION UP AN ESTIMATED 2.2% Y-O-Y
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.6 million short tons (mmst) of coal ...
Thursday, 08 January 15
INDONESIA PRESSES ON WITH HIGHER COAL ROYALTY FEE TO BOOST STATE REVENUE - JG
The Indonesian government is pressing on with its plan to raise the royalty charged to coal miners in order to increase state revenue, but the move ...
Wednesday, 07 January 15
FUEL EFFICIENT SHIPS MAKE LESS SENSE IN LOWER BUNKER PRICE MARKET, BUT FUEL COSTS ARE BOUND TO RISE AGAIN
The shipping industry entered 2015 on mixed emotions, as a relatively buoyant tanker market is met by a rather lackluster dry bulk market. Still, a ...
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- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Vedanta Resources Plc - India
- Bayan Resources Tbk. - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Savvy Resources Ltd - HongKong
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Binh Thuan Hamico - Vietnam
- Meenaskhi Energy Private Limited - India
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Goldman Sachs - Singapore
- Gujarat Sidhee Cement - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- Kohat Cement Company Ltd. - Pakistan
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Trasteel International SA, Italy
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Sree Jayajothi Cements Limited - India
- Bhatia International Limited - India
- Coal and Oil Company - UAE
- Edison Trading Spa - Italy
- Thiess Contractors Indonesia
- Minerals Council of Australia
- VISA Power Limited - India
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Directorate Of Revenue Intelligence - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- New Zealand Coal & Carbon
- CNBM International Corporation - China
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- Dalmia Cement Bharat India
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- IHS Mccloskey Coal Group - USA
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Oldendorff Carriers - Singapore
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Eastern Coal Council - USA
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
- Iligan Light & Power Inc, Philippines
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Altura Mining Limited, Indonesia
- AsiaOL BioFuels Corp., Philippines
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Independent Power Producers Association of India
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- Aditya Birla Group - India
- Bhushan Steel Limited - India
- Ministry of Finance - Indonesia
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Barasentosa Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- Deloitte Consulting - India
- Medco Energi Mining Internasional
- Videocon Industries ltd - India
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- International Coal Ventures Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- MS Steel International - UAE
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- ASAPP Information Group - India
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Mineral Development Corp Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Karaikal Port Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Electricity Authority, New Zealand
- IEA Clean Coal Centre - UK
- European Bulk Services B.V. - Netherlands
- Thai Mozambique Logistica
- Cigading International Bulk Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Kalimantan Lumbung Energi - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Metalloyd Limited - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Australian Coal Association
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- PTC India Limited - India
- Tata Chemicals Ltd - India
- Chamber of Mines of South Africa
- Manunggal Multi Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Economic Council, Georgia
- Ministry of Transport, Egypt
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Bukit Baiduri Energy - Indonesia
- Posco Energy - South Korea
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