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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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Thursday, 29 October 09
INDIA CEMENTS SET TO ACQUIRE COAL MINE IN INDONESIA
Business-Standard reported that, India Cements is set to acquire a coal mine in Indonesia for around $20 million (around Rs 100 crore). The company ...
Thursday, 29 October 09
PTC INDIA UNIT CHASES 2.5 MTPA INDONESIAN COAL
Reuters reported that, PTC Energy is in talks with an Indonesian firm to source 2.5 million tonnes per annum (MTPA) coal for its 350-400 MW power to ...
Thursday, 29 October 09
CHINA MAY SEEK THERMAL COAL ELSEWHERE IF AUSTRALIAN EXPORT COSTS RISE, SAYS REPORT
The Australian reported that, CHINA is likely to turn to alternative markets for thermal coal if the cost and availability of Australia's exports a ...
Thursday, 29 October 09
CURRENCIES, ASIA DEMAND TO LIFT EUROPE COAL PRICE
Supportive currency movements and strong Asian demand mean the price of coal delivered into Europe is poised to rise more than 30 percent to above $ ...
Wednesday, 28 October 09
AUSTRALIAN POWER STATION COAL PRICE TOPPED USD 73 A TONNE
Reuters reported that prices of power station coal in Australia, a benchmark for Asia, crept up for the fourth week and topped USD 73 a tonne, as a ...
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Showing 6296 to 6300 news of total 6871 |
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- Manunggal Multi Energi - Indonesia
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Videocon Industries ltd - India
- European Bulk Services B.V. - Netherlands
- OPG Power Generation Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Coastal Gujarat Power Limited - India
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Siam City Cement PLC, Thailand
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Carbofer General Trading SA - India
- Sical Logistics Limited - India
- Kepco SPC Power Corporation, Philippines
- London Commodity Brokers - England
- Kideco Jaya Agung - Indonesia
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- Planning Commission, India
- Baramulti Group, Indonesia
- Mercator Lines Limited - India
- Ministry of Finance - Indonesia
- Meenaskhi Energy Private Limited - India
- Energy Link Ltd, New Zealand
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- CIMB Investment Bank - Malaysia
- Sakthi Sugars Limited - India
- Cigading International Bulk Terminal - Indonesia
- VISA Power Limited - India
- Port Waratah Coal Services - Australia
- PetroVietnam Power Coal Import and Supply Company
- Savvy Resources Ltd - HongKong
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- ICICI Bank Limited - India
- GAC Shipping (India) Pvt Ltd
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- Indika Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Interocean Group of Companies - India
- Aditya Birla Group - India
- Energy Development Corp, Philippines
- Goldman Sachs - Singapore
- TeaM Sual Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- Singapore Mercantile Exchange
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Cement Manufacturers Association - India
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Iligan Light & Power Inc, Philippines
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- MS Steel International - UAE
- Antam Resourcindo - Indonesia
- Samtan Co., Ltd - South Korea
- San Jose City I Power Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- The University of Queensland
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Bhushan Steel Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Ministry of Transport, Egypt
- Georgia Ports Authority, United States
- Indian Energy Exchange, India
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- Ministry of Mines - Canada
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kumho Petrochemical, South Korea
- LBH Netherlands Bv - Netherlands
- Parliament of New Zealand
- ASAPP Information Group - India
- Romanian Commodities Exchange
- Aboitiz Power Corporation - Philippines
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Indo Tambangraya Megah - Indonesia
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Meralco Power Generation, Philippines
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- The State Trading Corporation of India Ltd
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Holcim Trading Pte Ltd - Singapore
- Semirara Mining Corp, Philippines
- Indonesian Coal Mining Association
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- Jindal Steel & Power Ltd - India
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- The Treasury - Australian Government
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Orica Australia Pty. Ltd.
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- Ambuja Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- India Bulls Power Limited - India
- Wilmar Investment Holdings
- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- Larsen & Toubro Limited - India
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