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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, 30 December 14
U.S WEEKLY COAL PRODUCTION ALMOST FLAT AT -0.2%
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.8 million short tons (mmst) of coal ...
Monday, 29 December 14
CHINESE COAL IMPORTS: REGULATORY RISKS? - CLARKSONS
In recent years, Chinese seaborne coal imports have surged, registering average growth of 67% p.a. between 2009 and 2013 to total 265mt. However, t ...
Monday, 29 December 14
BULK MARKET ENDS YEAR ON SOUR NOTE, SHIPBROKER SEES 'BUMPY ROAD AHEAD' - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
2014 was supposed to be the year that the dry bulk market would stage a comeback and a sustainable one for that matter. However, while for the most ...
Monday, 29 December 14
Q1'15 CFR SOUTH CHINA COAL SWAP CLOSED AT $59.42
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 3.51 (-5.58%) month over month and US$ 0.08 (-0.13%) ...
Monday, 29 December 14
SGX'S FOB NEWCASTLE COAL SWAPS IMPROVED W-O-W, LOST M-O-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.44 per MT (-2.73%) month over month and gained US$ 0.36 (+0.71%) ...
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- VISA Power Limited - India
- Minerals Council of Australia
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Indogreen Group - Indonesia
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- Larsen & Toubro Limited - India
- Sakthi Sugars Limited - India
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- Bhatia International Limited - India
- Chettinad Cement Corporation Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Australia Pty. Ltd.
- Anglo American - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Indian Energy Exchange, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Deloitte Consulting - India
- Bukit Baiduri Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Parliament of New Zealand
- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Independent Power Producers Association of India
- SN Aboitiz Power Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Carbofer General Trading SA - India
- Kartika Selabumi Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bhushan Steel Limited - India
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Trasteel International SA, Italy
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Maharashtra Electricity Regulatory Commission - India
- Bharathi Cement Corporation - India
- Bulk Trading Sa - Switzerland
- Makarim & Taira - Indonesia
- Mercuria Energy - Indonesia
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- GAC Shipping (India) Pvt Ltd
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Asmin Koalindo Tuhup - Indonesia
- Port Waratah Coal Services - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GN Power Mariveles Coal Plant, Philippines
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- India Bulls Power Limited - India
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Bahari Cakrawala Sebuku - Indonesia
- The University of Queensland
- Holcim Trading Pte Ltd - Singapore
- Sree Jayajothi Cements Limited - India
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- White Energy Company Limited
- Bhoruka Overseas - Indonesia
- Barasentosa Lestari - Indonesia
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Jaiprakash Power Ventures ltd
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Marubeni Corporation - India
- McConnell Dowell - Australia
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Romanian Commodities Exchange
- Timah Investasi Mineral - Indoneisa
- Siam City Cement PLC, Thailand
- Attock Cement Pakistan Limited
- Central Java Power - Indonesia
- Karaikal Port Pvt Ltd - India
- MS Steel International - UAE
- PTC India Limited - India
- Australian Coal Association
- Essar Steel Hazira Ltd - India
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- South Luzon Thermal Energy Corporation
- Pendopo Energi Batubara - Indonesia
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Orica Mining Services - Indonesia
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- GMR Energy Limited - India
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bukit Asam (Persero) Tbk - Indonesia
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- Banpu Public Company Limited - Thailand
- Kaltim Prima Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Planning Commission, India
- London Commodity Brokers - England
- Directorate General of MIneral and Coal - Indonesia
- Energy Link Ltd, New Zealand
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Kumho Petrochemical, South Korea
- Bangladesh Power Developement Board
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Eastern Coal Council - USA
- Samtan Co., Ltd - South Korea
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- TeaM Sual Corporation - Philippines
- Interocean Group of Companies - India
- Manunggal Multi Energi - Indonesia
- Coastal Gujarat Power Limited - India
- SMG Consultants - Indonesia
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
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