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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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Thursday, 01 January 15
FOB RICHARDS BAY COAL SWAPS CLOSED AT $63.47 PMT ON 26 DEC, SGX DATA SHOWS
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 3.37 (-4. ...
Wednesday, 31 December 14
COASTAL ENERGEN (C&O) COMMENCES 1ST UNIT OF 1200 MW POWER PLANT IN INDIA
COALspot.com: Coastal Energen, part of the Coal & Oil Group, announced last week the commissioning and commencement of power production at the ...
Wednesday, 31 December 14
SUB-BIT INDONESIA COAL Q2' 15 DELIVERY SWAP CLOSED 1.03% LOWER COMPARED TO AVERAGE Q1' 15 DELIVERY PRICE - SGX
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and gained week over week.
The Q1 swap has lost US$ 1.35 (-2 ...
Tuesday, 30 December 14
SHIP PRICES KEEP ON FALLING, SALES COME EARLY FOR SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship prices keep on falling on the back of low freight rates. According to the latest report from shipbroker Allied Shipbroking, January sales seem ...
Tuesday, 30 December 14
INDIA INC TO BENEFIT AS IMPORTED COAL PRICES SET TO FALL - RAHUL PRITHIANI
The Hindu: India‘s coal import volumes are set to rise by over 30 per cent over the next two years to 214 million tonnes in 2015-16, as domes ...
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- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Petron Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Salva Resources Pvt Ltd - India
- Posco Energy - South Korea
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- Timah Investasi Mineral - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Eastern Coal Council - USA
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- Kaltim Prima Coal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Edison Trading Spa - Italy
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- VISA Power Limited - India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Pendopo Energi Batubara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Global Coal Blending Company Limited - Australia
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Latin American Coal - Colombia
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Orica Australia Pty. Ltd.
- Iligan Light & Power Inc, Philippines
- Sojitz Corporation - Japan
- Petrochimia International Co. Ltd.- Taiwan
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- Carbofer General Trading SA - India
- Vedanta Resources Plc - India
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- GAC Shipping (India) Pvt Ltd
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- New Zealand Coal & Carbon
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- Manunggal Multi Energi - Indonesia
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Borneo Indobara - Indonesia
- Commonwealth Bank - Australia
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- Indonesian Coal Mining Association
- Ministry of Mines - Canada
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- Marubeni Corporation - India
- Trasteel International SA, Italy
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
- Jaiprakash Power Ventures ltd
- Mjunction Services Limited - India
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Bhushan Steel Limited - India
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Central Java Power - Indonesia
- Ministry of Finance - Indonesia
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- Siam City Cement - Thailand
- Malabar Cements Ltd - India
- Wood Mackenzie - Singapore
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Semirara Mining and Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- South Luzon Thermal Energy Corporation
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Planning Commission, India
- ICICI Bank Limited - India
- Interocean Group of Companies - India
- Heidelberg Cement - Germany
- Parry Sugars Refinery, India
- IHS Mccloskey Coal Group - USA
- Thiess Contractors Indonesia
- Banpu Public Company Limited - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Bayan Resources Tbk. - Indonesia
- Orica Mining Services - Indonesia
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- Minerals Council of Australia
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Coal and Oil Company - UAE
- Indian Oil Corporation Limited
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Standard Chartered Bank - UAE
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- ASAPP Information Group - India
- Tamil Nadu electricity Board
- Maheswari Brothers Coal Limited - India
- Bukit Baiduri Energy - Indonesia
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Bukit Makmur.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Eastern Energy - Thailand
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Indika Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- MS Steel International - UAE
- Bharathi Cement Corporation - India
- Coastal Gujarat Power Limited - India
- Formosa Plastics Group - Taiwan
- Mercuria Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Ind-Barath Power Infra Limited - India
- Port Waratah Coal Services - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sindya Power Generating Company Private Ltd
- Africa Commodities Group - South Africa
- Indogreen Group - Indonesia
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
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