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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, 23 December 14
SHIPOWNERS ARE FINALIZING MORE DEALS AS YEAR END COMES CLOSER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS WORLDWIDE
With the 2014 year just a few days before waving goodbye, shipowners are looking to close their pending deals in both the newbuilding and S&P m ...
Monday, 22 December 14
Q2'15 CFR SOUTH CHINA COAL SWAP CLOSED $ 0.30 LOWER THAN Q1'15 CLOSING
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 3.67 (-5.81%) month over month and US$ 0.35 (-0.58%) ...
Monday, 22 December 14
API 5 FOB NEWCASTLE COAL SWAPS ARE HEADING SOUTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.71 per MT (-3.24%) and closed at US$ 51.02 on 19 December month ...
Sunday, 21 December 14
PANAMAX COAL FREIGHT FROM INDONESIA TO INDIA FALLS FURTHER
COALspot.com: The BDI continued its fall as cape index lost heavily week on week.
The BDI was down 6.95 percent week over week and closed at 8 ...
Friday, 19 December 14
HOW WILL LOWER BUNKER PRICES AFFECT THE SUBSTANTIAL OVERCAPACITY IN DRY BULK MARKET? - BIMCO
As bunker fuel costs have come down from USD 600 per tonnes to USD 330 per tonnes in the past 6 months, much talk about increased ship speed have s ...
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- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- International Coal Ventures Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Edison Trading Spa - Italy
- Kartika Selabumi Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bhushan Steel Limited - India
- Port Waratah Coal Services - Australia
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Kapuas Tunggal Persada - Indonesia
- Gujarat Sidhee Cement - India
- Riau Bara Harum - Indonesia
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- Indian Energy Exchange, India
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- Chettinad Cement Corporation Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- Videocon Industries ltd - India
- Global Business Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Indian Oil Corporation Limited
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Xindia Steels Limited - India
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Leighton Contractors Pty Ltd - Australia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Economic Council, Georgia
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Jaiprakash Power Ventures ltd
- Krishnapatnam Port Company Ltd. - India
- Mjunction Services Limited - India
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Coastal Gujarat Power Limited - India
- Indogreen Group - Indonesia
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Mintek Dendrill Indonesia
- Sakthi Sugars Limited - India
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- Romanian Commodities Exchange
- Tata Chemicals Ltd - India
- Rio Tinto Coal - Australia
- McConnell Dowell - Australia
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Aditya Birla Group - India
- Mercator Lines Limited - India
- Therma Luzon, Inc, Philippines
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Commonwealth Bank - Australia
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Heidelberg Cement - Germany
- The University of Queensland
- Tamil Nadu electricity Board
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Rashtriya Ispat Nigam Limited - India
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Iligan Light & Power Inc, Philippines
- Bangladesh Power Developement Board
- Vizag Seaport Private Limited - India
- Meralco Power Generation, Philippines
- VISA Power Limited - India
- The Treasury - Australian Government
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Minerals Council of Australia
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Ministry of Transport, Egypt
- Chamber of Mines of South Africa
- Sree Jayajothi Cements Limited - India
- Parry Sugars Refinery, India
- Bhoruka Overseas - Indonesia
- SN Aboitiz Power Inc, Philippines
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Orica Mining Services - Indonesia
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- PNOC Exploration Corporation - Philippines
- Merrill Lynch Commodities Europe
- Karbindo Abesyapradhi - Indoneisa
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
- Mercuria Energy - Indonesia
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Formosa Plastics Group - Taiwan
- ASAPP Information Group - India
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Price Waterhouse Coopers - Russia
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