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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, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Bahari Cakrawala Sebuku - Indonesia
- Mjunction Services Limited - India
- Xindia Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Port Waratah Coal Services - Australia
- AsiaOL BioFuels Corp., Philippines
- Jorong Barutama Greston.PT - Indonesia
- IEA Clean Coal Centre - UK
- Karbindo Abesyapradhi - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Aboitiz Power Corporation - Philippines
- Aditya Birla Group - India
- Energy Development Corp, Philippines
- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- VISA Power Limited - India
- Siam City Cement - Thailand
- Minerals Council of Australia
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Essar Steel Hazira Ltd - India
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Binh Thuan Hamico - Vietnam
- Interocean Group of Companies - India
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Medco Energi Mining Internasional
- Barasentosa Lestari - Indonesia
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Sindya Power Generating Company Private Ltd
- Merrill Lynch Commodities Europe
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Madhucon Powers Ltd - India
- Attock Cement Pakistan Limited
- PNOC Exploration Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- The Treasury - Australian Government
- Mercator Lines Limited - India
- Tamil Nadu electricity Board
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Bukit Asam (Persero) Tbk - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
- Goldman Sachs - Singapore
- White Energy Company Limited
- Commonwealth Bank - Australia
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Mintek Dendrill Indonesia
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- India Bulls Power Limited - India
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Jaiprakash Power Ventures ltd
- Manunggal Multi Energi - Indonesia
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Vedanta Resources Plc - India
- Alfred C Toepfer International GmbH - Germany
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Central Electricity Authority - India
- Oldendorff Carriers - Singapore
- Bukit Baiduri Energy - Indonesia
- SN Aboitiz Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Economic Council, Georgia
- Coal and Oil Company - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- ASAPP Information Group - India
- San Jose City I Power Corp, Philippines
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Independent Power Producers Association of India
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Australian Coal Association
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Sinarmas Energy and Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Electricity Generating Authority of Thailand
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Pendopo Energi Batubara - Indonesia
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Chettinad Cement Corporation Ltd - India
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Bharathi Cement Corporation - India
- Antam Resourcindo - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- Kohat Cement Company Ltd. - Pakistan
- Sakthi Sugars Limited - India
- New Zealand Coal & Carbon
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
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