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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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Friday, 26 December 14
SHIPS FACE LOWER SULPHUR FUEL REQUIREMENTS IN EMISSION CONTROL AREAS FROM 1 JANUARY 2015 - IMO
Ships trading in designated emission control areas will have to use on board fuel oil with a sulphur content of no more than 0.10% from 1 January 2 ...
Wednesday, 24 December 14
CAPE DEMAND WAS STILL EXTREMELY SOFT THIS PAST WEEK ACROSS BOTH BASINS - INTERMODAL
COALspot.com: The performance of the Dry Bulk market, which found itself in desperate search of support for yet another week, has left very little ...
Wednesday, 24 December 14
MARKET INSIGHT - JOHN N. COTZIAS, INTERMODAL SNP BROKER
The year is coming to an end, and we should be able to assess if this was a good year, a bad year, or even a lousy one? The answer clearly de ...
Tuesday, 23 December 14
Q1'15 FOB INDONESIA COAL SWAP GAINED 48 CENTS IN ONE WEEK
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and gained week over week and day on day.
The Q1 swap has lo ...
Tuesday, 23 December 14
Q4'15 FOB RICHARDS BAY COAL SWAPS FALL $ 3.85 IN A MONTH
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month.
The Q1 swap has lost US$ 2.13 (-3.17%) month on month ...
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- Chamber of Mines of South Africa
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Videocon Industries ltd - India
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indian Oil Corporation Limited
- Independent Power Producers Association of India
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- India Bulls Power Limited - India
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- Baramulti Group, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Eastern Energy - Thailand
- Borneo Indobara - Indonesia
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- Commonwealth Bank - Australia
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Singapore Mercantile Exchange
- Tata Chemicals Ltd - India
- Leighton Contractors Pty Ltd - Australia
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- Bulk Trading Sa - Switzerland
- PTC India Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coal and Oil Company - UAE
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Planning Commission, India
- PNOC Exploration Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Karbindo Abesyapradhi - Indoneisa
- PowerSource Philippines DevCo
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- Bhushan Steel Limited - India
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Posco Energy - South Korea
- Eastern Coal Council - USA
- Mjunction Services Limited - India
- Rio Tinto Coal - Australia
- Tamil Nadu electricity Board
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Larsen & Toubro Limited - India
- ICICI Bank Limited - India
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Directorate Of Revenue Intelligence - India
- Gujarat Sidhee Cement - India
- Agrawal Coal Company - India
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Mercator Lines Limited - India
- Metalloyd Limited - United Kingdom
- Parry Sugars Refinery, India
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Maharashtra Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Cigading International Bulk Terminal - Indonesia
- Aditya Birla Group - India
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Gujarat Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- White Energy Company Limited
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- ASAPP Information Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Trasteel International SA, Italy
- Deloitte Consulting - India
- Kideco Jaya Agung - Indonesia
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- Australian Coal Association
- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- Economic Council, Georgia
- Electricity Generating Authority of Thailand
- Bukit Makmur.PT - Indonesia
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