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Tuesday, 20 October 09
COAL PRICES TO SURGE IN 2010 DESPITE AMPLE SUPPLY
 Commodity Online reported that, Coal prices are indeed destined to go higher as they follow the rise of ‘coal currencies’ such as Australian Dollar (AUD), South African Rand (ZAR) and Columbian Peso (COP). Strong emerging market demand is also pushing up prices although it may be limited by abundant stocks on coal producing countries.
The BofA Merrill Lynch Global Report on energy pointed out that many “oil currencies” including UAE Dirhams (AED) and Saudi Arabian Riyal (SAR) are pegged to the US dollar, but coal exporters tend to keep a free float therefore currencies linked to coal have outperformed both their emerging market and G-10 peers. The report notes that near upside gains in steam coal will be limited to US dollar weakness.
Mirroring forex, prompt API-2 thermal coal prices have jumped 9% in the past month reaching $73/mt—slightly ahead of crude oil and petroleum products—while calendar prices for 2010 have recovered to a six-week high of over $84/mt. With coal inventories swelling to record highs around the globe, any near-term upside pressure on front-month coal prices above $80/mt is likely to be limited to further USD weakness. Although BofA Merrill Lynch Global report said that steam coal forwards to flatten significantly over the next six months as the recovery takes hold, excess supply will still dampen any upside pressure on near-dated spreads in the short-run.
The outlook for thermal coal markets should improve significantly and high inventories will be burned down next year as coal is set to regain market share relative to natural gas. Chinese and Indian demand for coal is already growing strongly. With a demand recovery coming in the rest of Asia, South Africa and the Atlantic Basin, the market is likely to tighten pretty quickly in 2010.
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As a result, API-4 South African coal prices have appreciated strongly in USD but not so much in local currencies. This situation arises because some of the world’s largest coal exporters like South Africa, Australia, and Colombia keep a free float. The logic supporting the recent move in coal prices is compelling. On the one hand, coal happens to be exported out of countries with a free-floating currency regime. On the other side, coal is the fuel of choice in an EM-led domestic recovery, as China, India, and many other emerging economies will require bucket-loads of cheap energy to maintain a fast pace of growth. Having said that, coal prices have lagged the rapid weakening of the trade-weighteddollar, suggesting coal prices could trend higher only to catch up with the recent currency moves, BofA Merrill Lynch Report said.
A wall of inventories will cap steam coal near-term
With coal inventories swelling to new record highs around the globe, any nearterm upside pressure in front-month coal prices above $80/mt will require further dollar weakness. Europe, a key consuming area for thermal coal, currently holds record stockpiles of Colombian and Russian material at its main ports in Amsterdam, Antwerp, and Rotterdam. European utilities are also awash with coal. In the US, the situation is even more pronounced, with inventories held at utilities standing at 70 days of consumption, 13 days higher than last year. In fact, coal inventories are pretty healthy everywhere, including parts of the Asia Pacific. India, and China are an exception as stocks seem to be drawing there at the moment.
Rising coal production will also limit upside on prices
Another factor limiting the near-term upside on coal is the healthy growth in supply. Russia seems to have turned its corner following an earlier slump in coal exports. During the first eight months of this year, Russian exports to Europe increased 19% relative to last year driven by rail and port de-bottlenecking. The export performance out of Australia has improved significantly in the past weeks and currently stands at the highest in over four months. Port congestion is down to just 20 ships, from 42 a few weeks ago, and should continue to improve gradually throughout next year as Newcastle adds a third terminal in Q1. Production in Colombia is also looking a lot healthier.
However, the thermal coal market will rebalance in 2010...
None of these bearish factors will last and we expect a rebound in global coal prices next year. The global thermal coal market will firmly rebalance primarily from the demand-side, BofA Merrill Lynch report stated. It expects the demand in Pacific region to outstrip that of West. demand in the Pacific outstrips demand in the West. Chinese and Indian demand for coal is already growing pretty strongly and once we add a demand recovery in the rest of Asia Pacific, South Africa, and the Atlantic Basin, the current excess supply in the market will be soaked up pretty quickly. A combination of power generation growth, industrial demand recovery, generation capacity growth, and fuel switching will firmly support global coal demand next year at around 3% growth, from -0.3% this year, according to BofA Merrill Lynch Global Report.
...as demand for coal is recovering, led by China and India
Looking at the main demand drivers in turn, demand in China and India is already growing pretty rapidly, driven by the upsurge in electricity generation and strategic stock-building of the past months. In the first eight months of this year, China imported 74 million mt of coal, up from 29 million mt in the prior year, a truly mind-boggling increase. As exports more than halved in the same period, China firmly switched from being a net exporter last year (4.8 million mt) to being a net importer (59 million mt YTD) (Chart 12). China has been moving away from Australia and Indonesia, at the margin, and started to source coal from farther away places like Russia, South Africa, Canada and Colombia— helped by low freight rates.
With prices below $100/t, China will remain a net importer
Paradoxically, the higher Chinese imports have occurred at a time that domestic production has surged to a new record. As regulators have kept domestic coal prices high relative to seaborne prices, Chinese utilities have moved to imported coal. Regional distribution bottlenecks, particularly in the railway system, have also continued to prevent the domestically produced coal to travel from the inner regions to the coastal demand centers, hence supporting coal prices in the East.
Coal demand in Asia Pacific is improving very rapidly...
In India, an acute shortage of domestic coal and a string of supply constraints have driven coal imports sharply higher. This material has come mainly from. Only 5 years ago, India hardly imported any coal but it now soaks up 70 million tons per annum. Bucking the global trend, Indian coal stocks are critically low due to a combination of monsoon rains, domestic mine strikes and stagnant production growth.
Meanwhile, coalfired generation growth is back to record highs but is now reportedly being constrained by the lack of coal (Chart 15). At this rate, coal supply shortages in India are likely to be prevalent for a long time. The government set stringent targets for electricity generation capacity and the share of coal-fired plants in the generation mix is set to rise to 57% by 2010, from 53% currently. With domestic demand for coal likely to grow unabated, Indian companies are now in the
process of buying up coal assets in South Africa, Indonesia, and Australia.
...and will eventually pull global thermal coal prices higher
While China and India currently stand out, demand will also come back strongly in other Asian countries, such as Korea, Taiwan, and Thailand. Japan is probably the only country that will not exert strong international buying pressure because domestic nuclear power generation capacity is coming back. Steadier demand growth is not only confined to Asia though. Power generation in South Africa, where 70% of capacity is coal-fired, is now almost back at pre-crisis levels. Relative to last year, power output is down by a meager 1.2%. Once coal demand returns to trend growth of 5%, it will quickly outpace production growth, which has remained fairly constant in the past years. Moreover, Eskom is constructing a number of coal-fired power stations, probably helping to drive coal demand higher.
Gas to coal fuel-switching will boost US, Europe demand
Capacity growth could also be a significant driver in the United States where a number of new coal-fired plants are coming to the market. Out of 19 GW potentially added next year, 7.5 GW alone will be coal-fired. No doubt, the recession has significantly reduced the demand for power and expanded reserve margins. However, coal is likely to gain back significant market share next year as the recovery sets in. Although gas-fired plants have displaced coal-fired generation
recently, this situation is not expected to last. Importantly, coal-to-gas switching occurred on the back of exceptionally low gas prices. BofA Merrill Lynch Global Report said that the spread of USnatural gas to coal will widen again next year, supporting coal demand.
In Europe, a toxic combination of falling power and industrial demand together with cheap natural gas prices has also contributed to loosen up the demand for the fossil fuel. Power supplies are likely to be reasonably comfortable this winter due to high natural gas inventories. Still, we expect this situation to reverse rapidly in the first half of next year. The lagged impact from rising oil prices will feed through to indexed European natural gas. Unless CO2 prices rise sharply—
which is unlikely given the current oversupply of permits—coal demand, which has also suffered from fuel switching, will pick up fairly significantly.
Economic recovery may push coal to over $100/t in 2010
In sum, the outlook for the thermal coal markets could improve significantly going forward.. Increased demand coupled with stronger “coal currencies”, could push European API-2 coal prices above $100/mt by the middle of next year, the report added.
Dry freight will buck the trend, remaining range-bound
Coal demand is set to eventually pick up driving up coal prices next year but freight rates will be low. A massive order book of new dry bulk ships will continue to push new ships online at a very rapid rate. Although demand for dry bulk goods, importantly iron ore, is improving everywhere as steel capacity utilization is rising, shipping bottlenecks will not reappear for another 2-3 years at the earliest, the BofA Merrill Lynch Global Report added.
Source: Commodity Online
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Saturday, 31 October 09
PRODUCERS BENEFIT FROM COAL'S TIGHT SUPPLY AND STRONG DEMAND
The Jakarta Post reported that, The outlook for Indonesian coal producers appears promising with strong volume growth coming from both the domestic ...
Saturday, 31 October 09
FLSMIDTH WINS MAJOR INDIAN COAL HANDLING PROJECT
Top global supplier of minerals processing and materials handling equipment, FL smidth, has won another important coal handling contract in India
...
Saturday, 31 October 09
INDIA OPENING POWER SECTOR TO PRIVATE INVESTMENT, COAL STILL THE FUEL OF CHOICE
Energy Tribune reported that, With coal-fired power plants as the primary source, India’s electricity generation sector space has been dominat ...
Friday, 30 October 09
MINERS TOLD TO SPEND ON LOCAL SERVICE FIRMS
The energy and mineral resources ministry has issued a ministerial regulation ordering mining firms to prioritize hiring domestic service companies ...
Friday, 30 October 09
TATA POWER MAY BUY COAL FROM RIVERSDALE'S MOZAMBIQUE MINES
Bloomberg reported that, Tata Power Ltd., India’s biggest electricity generator outside state control, may buy coal from a mine in Mozambique ...
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Showing 6286 to 6290 news of total 6871 |
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- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- Commonwealth Bank - Australia
- Parry Sugars Refinery, India
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Directorate General of MIneral and Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- MS Steel International - UAE
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- IEA Clean Coal Centre - UK
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- McConnell Dowell - Australia
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Goldman Sachs - Singapore
- Ceylon Electricity Board - Sri Lanka
- Leighton Contractors Pty Ltd - Australia
- OPG Power Generation Pvt Ltd - India
- Wilmar Investment Holdings
- Gujarat Mineral Development Corp Ltd - India
- Electricity Generating Authority of Thailand
- Mjunction Services Limited - India
- Savvy Resources Ltd - HongKong
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- Agrawal Coal Company - India
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Toyota Tsusho Corporation, Japan
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- Parliament of New Zealand
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- Bangladesh Power Developement Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- Australian Commodity Traders Exchange
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Meenaskhi Energy Private Limited - India
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- India Bulls Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Australian Coal Association
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Indonesian Coal Mining Association
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Formosa Plastics Group - Taiwan
- Price Waterhouse Coopers - Russia
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Renaissance Capital - South Africa
- Sical Logistics Limited - India
- SN Aboitiz Power Inc, Philippines
- Makarim & Taira - Indonesia
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Port Waratah Coal Services - Australia
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Coalindo Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Uttam Galva Steels Limited - India
- Sojitz Corporation - Japan
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- Maheswari Brothers Coal Limited - India
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Edison Trading Spa - Italy
- Siam City Cement PLC, Thailand
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- European Bulk Services B.V. - Netherlands
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- CIMB Investment Bank - Malaysia
- Indian Energy Exchange, India
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- PNOC Exploration Corporation - Philippines
- Altura Mining Limited, Indonesia
- LBH Netherlands Bv - Netherlands
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Jindal Steel & Power Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Samtan Co., Ltd - South Korea
- London Commodity Brokers - England
- Posco Energy - South Korea
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- The University of Queensland
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- New Zealand Coal & Carbon
- Aditya Birla Group - India
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Ambuja Cements Ltd - India
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- TeaM Sual Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Ind-Barath Power Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Star Paper Mills Limited - India
- Miang Besar Coal Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Central Electricity Authority - India
- Indika Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
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