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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, 07 January 15
2015 IS RIDDLED WITH CHALLENGES FOR THE SHIPPING SECTOR, MOST NOTABLY THE DRY BULK MARKET - HELLENIC SHIPPING NEWS
As the new year has now set foot for real, many are still looking to detect what’s in store for the various shipping markets, with the first ...
Tuesday, 06 January 15
SHIPPING MUST ADOPT CAN-DO ATTITUDE IN 2015 - MOORE STEPHENS
Shipping needs to adopt a can-do attitude in order to successfully meet the challenges which are likely to come its way in 2015.
Shipping part ...
Tuesday, 06 January 15
Q4' 15 FOB INDONESIA COAL SWAP CLOSED 1.81% HIGHER COMPARED TO Q1' 15 CLOSING
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 0.74 (-1.51%) m ...
Tuesday, 06 January 15
FOB RICHARDS BAY COAL SWAPS LOST W-O-W AND M-O-M, SGX DATA SHOWS
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 3.52 (-5. ...
Monday, 05 January 15
CFR SOUTH CHINA COAL SWAPS GAINED WEEK OVER WEEK, SGX DATA SHOWS
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 2.50 (-4.02%) month over month and gained US$ 0.20 ( ...
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- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Indian Energy Exchange, India
- Bhoruka Overseas - Indonesia
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Makarim & Taira - Indonesia
- Xindia Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Economic Council, Georgia
- Karaikal Port Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- CNBM International Corporation - China
- India Bulls Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- Attock Cement Pakistan Limited
- Georgia Ports Authority, United States
- Planning Commission, India
- Salva Resources Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Medco Energi Mining Internasional
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- Mercator Lines Limited - India
- Central Java Power - Indonesia
- Africa Commodities Group - South Africa
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Miang Besar Coal Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- ASAPP Information Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Global Coal Blending Company Limited - Australia
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Antam Resourcindo - Indonesia
- Ind-Barath Power Infra Limited - India
- Interocean Group of Companies - India
- Karbindo Abesyapradhi - Indoneisa
- Sojitz Corporation - Japan
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Altura Mining Limited, Indonesia
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Wood Mackenzie - Singapore
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chettinad Cement Corporation Ltd - India
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Intertek Mineral Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Mintek Dendrill Indonesia
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Siam City Cement - Thailand
- OPG Power Generation Pvt Ltd - India
- Tamil Nadu electricity Board
- Indian Oil Corporation Limited
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Directorate General of MIneral and Coal - Indonesia
- Minerals Council of Australia
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- MS Steel International - UAE
- Kideco Jaya Agung - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Vizag Seaport Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Goldman Sachs - Singapore
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Carbofer General Trading SA - India
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Ministry of Transport, Egypt
- Marubeni Corporation - India
- Australian Commodity Traders Exchange
- McConnell Dowell - Australia
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- White Energy Company Limited
- Baramulti Group, Indonesia
- Kartika Selabumi Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- SMC Global Power, Philippines
- Star Paper Mills Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Australian Coal Association
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Grasim Industreis Ltd - India
- Maheswari Brothers Coal Limited - India
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- SMG Consultants - Indonesia
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Sree Jayajothi Cements Limited - India
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- The University of Queensland
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- Agrawal Coal Company - India
- Eastern Coal Council - USA
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- Trasteel International SA, Italy
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Cement Manufacturers Association - India
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- PTC India Limited - India
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Kapuas Tunggal Persada - Indonesia
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