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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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Monday, 05 January 15
FIVE ENERGY SURPRISES FOR 2015: THE POSSIBLE AND THE IMPROBABLE - KURT COBB
The coming year is likely to be as full of surprises in the field of energy as 2014 was. We just don't know which surprises! I am not predictin ...
Monday, 05 January 15
THE SHIPPING MARKET IN 2014 AND LOOKING FORWARD - BIMCO
2014 started with plenty of optimism for a considerably better global economy and an improved shipping market. Things turned out somewhat different ...
Monday, 05 January 15
API 5 FOB NEWCASTLE COAL SWAP FOR Q1'15 DELIVERY CLOSED US$ 0.45 HIGHER COMPARED TO Q2'15 CLOSING
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 0.60 per MT (-1.15%) month over month and gained US$ 0.02 (+0.04%) ...
Sunday, 04 January 15
BALTIC DRY INDEX CONTINUES ITS DECLINE IN 2015
Wish you all a very Happy New Year 2015. The last report was dated 19th Dec 2014 and due to Christmas and new year holidays no reports were publish ...
Saturday, 03 January 15
U.S WEEKLY COAL PRODUCTION FELL 11.2% TO 17.6 MMST WEEK OVER WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.6 million short tons (mmst) of coal ...
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- Pendopo Energi Batubara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- OPG Power Generation Pvt Ltd - India
- Vizag Seaport Private Limited - India
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- GN Power Mariveles Coal Plant, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Meralco Power Generation, Philippines
- Globalindo Alam Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- TNB Fuel Sdn Bhd - Malaysia
- CIMB Investment Bank - Malaysia
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Billiton Holdings Pty Ltd - Australia
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Deloitte Consulting - India
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Grasim Industreis Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- VISA Power Limited - India
- Vedanta Resources Plc - India
- PTC India Limited - India
- Straits Asia Resources Limited - Singapore
- CNBM International Corporation - China
- Bayan Resources Tbk. - Indonesia
- Ambuja Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Kartika Selabumi Mining - Indonesia
- Latin American Coal - Colombia
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Coastal Gujarat Power Limited - India
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- White Energy Company Limited
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- PetroVietnam Power Coal Import and Supply Company
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Lanco Infratech Ltd - India
- The University of Queensland
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining Corp, Philippines
- MS Steel International - UAE
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Formosa Plastics Group - Taiwan
- Commonwealth Bank - Australia
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- TeaM Sual Corporation - Philippines
- Global Business Power Corporation, Philippines
- Chamber of Mines of South Africa
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Orica Mining Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Tata Chemicals Ltd - India
- PowerSource Philippines DevCo
- European Bulk Services B.V. - Netherlands
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- Altura Mining Limited, Indonesia
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Samtan Co., Ltd - South Korea
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Independent Power Producers Association of India
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Rio Tinto Coal - Australia
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Gujarat Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- Electricity Generating Authority of Thailand
- The State Trading Corporation of India Ltd
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Larsen & Toubro Limited - India
- Borneo Indobara - Indonesia
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rashtriya Ispat Nigam Limited - India
- Bulk Trading Sa - Switzerland
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Salva Resources Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- LBH Netherlands Bv - Netherlands
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Bangladesh Power Developement Board
- Mercator Lines Limited - India
- Indian Oil Corporation Limited
- Sojitz Corporation - Japan
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