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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, 17 October 09
US COAL MINERS LOOKING AT LOWER PROFITS
Most US coal miners are looking at sharply lower third-quarter earnings, but those that produce coal for steelmaking and export should enjoy higher ...
Friday, 16 October 09
INDONESIA EXPORTED 19,194,857 MT OF COAL IN SEPTEMBER 2009 - SOURCES
COALspot.com (Indonesia): Indonesia exported 19,194,857 MT of coal in September 2009. Out of total exported quantity, South Korea imported abou ...
Friday, 16 October 09
NAVIGATING THROUGH STORMY WATERS
To Theodore E Veniamis, the President of the Union of Greek Shipowners, the current turmoil in world shipping is due to the cyclical nature of marit ...
Friday, 16 October 09
COAL INDIA RAISES PRICE BY 11%
Trak reported that, State-owned Coal India Ltd (CIL) has raised the price of coal produced by its subsidiaries by an average of 11 percent effective ...
Thursday, 15 October 09
SOUTH AFRICAN MINING COMPANY ACCEPTED $92 MILLION BID FOR COAL MINE STAKE IN SIYANDA COAL
Paguntaka reported that, Sentula Mining Ltd. gained in Johannesburg trading after the South African company accepted a 686 million-rand ($92 million ...
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Showing 6331 to 6335 news of total 6871 |
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- Pipit Mutiara Jaya. PT, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Australian Coal Association
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Attock Cement Pakistan Limited
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- ASAPP Information Group - India
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Carbofer General Trading SA - India
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Metalloyd Limited - United Kingdom
- Salva Resources Pvt Ltd - India
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- SMG Consultants - Indonesia
- AsiaOL BioFuels Corp., Philippines
- ICICI Bank Limited - India
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Power Finance Corporation Ltd., India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Java Power - Indonesia
- GAC Shipping (India) Pvt Ltd
- LBH Netherlands Bv - Netherlands
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- Grasim Industreis Ltd - India
- Petron Corporation, Philippines
- White Energy Company Limited
- Planning Commission, India
- Economic Council, Georgia
- PTC India Limited - India
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Rashtriya Ispat Nigam Limited - India
- Edison Trading Spa - Italy
- Bhushan Steel Limited - India
- Semirara Mining and Power Corporation, Philippines
- Interocean Group of Companies - India
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Petrochimia International Co. Ltd.- Taiwan
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Sical Logistics Limited - India
- Madhucon Powers Ltd - India
- Siam City Cement PLC, Thailand
- Bukit Baiduri Energy - Indonesia
- Ministry of Finance - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Aboitiz Power Corporation - Philippines
- Merrill Lynch Commodities Europe
- Coastal Gujarat Power Limited - India
- Directorate General of MIneral and Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Goldman Sachs - Singapore
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- Samtan Co., Ltd - South Korea
- Mercator Lines Limited - India
- Xindia Steels Limited - India
- Port Waratah Coal Services - Australia
- Central Electricity Authority - India
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Energy Link Ltd, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Sindya Power Generating Company Private Ltd
- Aditya Birla Group - India
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Altura Mining Limited, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Borneo Indobara - Indonesia
- Siam City Cement - Thailand
- Kobexindo Tractors - Indoneisa
- Savvy Resources Ltd - HongKong
- Kapuas Tunggal Persada - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Global Green Power PLC Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Latin American Coal - Colombia
- Alfred C Toepfer International GmbH - Germany
- Eastern Energy - Thailand
- Uttam Galva Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- MS Steel International - UAE
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Medco Energi Mining Internasional
- GMR Energy Limited - India
- Toyota Tsusho Corporation, Japan
- Independent Power Producers Association of India
- Bulk Trading Sa - Switzerland
- Simpson Spence & Young - Indonesia
- Anglo American - United Kingdom
- Romanian Commodities Exchange
- Therma Luzon, Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- Wood Mackenzie - Singapore
- Lanco Infratech Ltd - India
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Makmur.PT - Indonesia
- Dalmia Cement Bharat India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Intertek Mineral Services - Indonesia
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Asmin Koalindo Tuhup - Indonesia
- Heidelberg Cement - Germany
- Indian Energy Exchange, India
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