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Monday, 09 February 15
AUSTRALIAN COAL PRODUCERS BEST POSITIONED IN OVERSUPPLIED MARKET; US MINES MOST AT RISK - WOOD MACKENZIE
 In a 2015 global coal outlook report, Wood Mackenzie says that Australia and Indonesian coal suppliers will see some upside in the difficult months ahead as they continue to capture market share of coal exports from higher cost producers. Further modest productivity gains, the rapid fall in oil prices and currency devaluation in Australia and Russia will help lower costs. Therefore, Australian mines stands in a relatively strong position compared with higher cost suppliers - particularly those in the US - which are at much greater risk of closures this year. Even with increased closures and reduced US supply, Wood Mackenzie says they do not foresee sufficient volume exiting to balance the market and support price recovery. Lower-than-anticipated demand, especially from China combined with persistent production will be key factors that will sustain the weak market environment.
Australian producers best positioned in 2015
Mr Rory Simington, Principal Asia Pacific Coal Analyst says, “Australia is a standout competitor in both the metallurgical (met) and thermal coal trade, but particularly the former. Comparing 2014 from 2013, while global met coal import demand reduced by about 8 Mt, Australian exports rose by around 14 million tonnes (Mt), growing seaborne market share from 58% to 64%. The scalability of Australian mines and their high coal quality has enabled the displacement of major competitors in US, Canada and Indonesia. This trend is likely to continue thanks to a continued strong operating performance plus currency depreciation. On the other hand, US suppliers, many of which exhibit high costs, will not see the cost relief that currency devaluation brings to Australia.”
Furthermore, increased competition will come from higher Mozambique exports this year as Vale’s Nacala transport corridor ramps up indicating another year of aggressive pricing as producers fight to secure sales. In thermal coal, Australian exports were also strong, leaping 20Mt despite seaborne demand remaining essentially flat last year.
Lower costs discourage large-scale shutdowns
Despite a traumatic 2014 for the coal industry, mine shutdowns were relatively muted. Mr Simington explains, ”In fact metallurgical supply reductions were more than offset by the reduction in Chinese import demand, resulting in increased overcapacity. Although overall closures will accelerate this year, they will unlikely redress the imbalance.” Costly take or pay obligations in the event of closure, makes it more expensive for mines to shutdown than operate at a loss. As such, they remain in production and hamper the return to tighter market conditions. The recent low oil price and exchange rate has driven cost relief for Australia, Indonesia and Russia, which will further reduce the likelihood of wholesale supply cuts as well as delay any price recovery.
China uncertainties depress demand in oversupplied market
China’s economic rebalancing will continue to affect power demand growth and therefore thermal coal requirements. Of critical importance to the seaborne trade will be the effects of Government policies designed to protect the environment as well as domestic coal suppliers. Mr Robin Griffin, Research Director for Global Metallurgical Coal, says, “Current industry focus is on the new trace element restrictions for imported coal. We see most seaborne supply meeting the new guidelines but import levels are affected due to the uncertainty of the accuracy of coal quality tests and delays it may cause to the delivery process. Another big uncertainty to watch is the lengths to which the Chinese Government will go to protect its domestic industry.” Wood Mackenzie says stricter limits on imported coal quality is possible and the Government could make an aggressive move to waive the 17% value added tax (VAT) charged on coal sales which could considerably enhance the competitiveness of Chinese coal and enable some of the best quality and lowest cost Chinese coking coal to compete into Japan, South Korea or Taiwan. Should this occur, worsened oversupply conditions could occur in 2015.
Mr Griffin says “As China makes up 22% of seaborne trade and is expected see continued domestic oversupply, the country will be a major cause of depressed global import demand this year. Market fundamentals outside of China also remain uninspiring, for both metallurgical and thermal coal. Under such circumstances a material price recovery is unlikely this year”.
M&A activities to pick up in 2015
“Mine asset valuations have fallen considerably over the last three years due to the weakening market. Whilst low prices endure more companies will look to shed assets, perhaps to decrease debt or to allow a greater focus on their highest value operations. The negative price environment will persist through 2015 but not forever. Given our expectation of long term strength in coal demand fundamentals, the present market conditions offer a window of opportunity for both suppliers and buyers to consolidate their positions in the industry. We expect M&A to start picking up this year particularly for companies who want to gain a foothold in the industry for the long term.”
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
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Friday, 30 January 15
CAN BULKER CONVERSIONS SPOIL THE TANKER MARKET'S PARTY? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
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 ...
Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
Wednesday, 28 January 15
CAPES CONTINUED THEIR UPWARD MOVEMENT LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market displayed a mirror performance of that of the week prior, with the Capesize market correcting further upwards and ...
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- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Chettinad Cement Corporation Ltd - India
- Eastern Coal Council - USA
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Interocean Group of Companies - India
- Globalindo Alam Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Carbofer General Trading SA - India
- Indian Energy Exchange, India
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Bhoruka Overseas - Indonesia
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Sarangani Energy Corporation, Philippines
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- Bhatia International Limited - India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Anglo American - United Kingdom
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Vizag Seaport Private Limited - India
- Formosa Plastics Group - Taiwan
- Petron Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Australian Coal Association
- Merrill Lynch Commodities Europe
- Commonwealth Bank - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Kaltim Prima Coal - Indonesia
- ASAPP Information Group - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Rio Tinto Coal - Australia
- Planning Commission, India
- India Bulls Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Economic Council, Georgia
- Savvy Resources Ltd - HongKong
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Goldman Sachs - Singapore
- Madhucon Powers Ltd - India
- Australian Commodity Traders Exchange
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bangladesh Power Developement Board
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Aboitiz Power Corporation - Philippines
- LBH Netherlands Bv - Netherlands
- Alfred C Toepfer International GmbH - Germany
- Medco Energi Mining Internasional
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Port Waratah Coal Services - Australia
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Directorate Of Revenue Intelligence - India
- Star Paper Mills Limited - India
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- Ministry of Transport, Egypt
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- Intertek Mineral Services - Indonesia
- Wilmar Investment Holdings
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Cigading International Bulk Terminal - Indonesia
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- VISA Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- London Commodity Brokers - England
- Dalmia Cement Bharat India
- Renaissance Capital - South Africa
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- SN Aboitiz Power Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- Ministry of Mines - Canada
- MS Steel International - UAE
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- Vijayanagar Sugar Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Central Java Power - Indonesia
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Siam City Cement PLC, Thailand
- International Coal Ventures Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- Singapore Mercantile Exchange
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- Bukit Baiduri Energy - Indonesia
- The University of Queensland
- Binh Thuan Hamico - Vietnam
- Indogreen Group - Indonesia
- Jindal Steel & Power Ltd - India
- Georgia Ports Authority, United States
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- GN Power Mariveles Coal Plant, Philippines
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