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Tuesday, 10 March 20
CORONAVIRUS: DEMAND DOWNGRADES FOR BULK COMMODITIES - WOOD MACKENZIE
 The coronavirus outbreak is a rapidly evolving news story – and a real wildcard for bulks demand. Our global experts are monitoring the impact closely, and this article provides a summary of our latest forecasts for steel, iron ore, metallurgical coal and thermal coal.
When will China return to ‘business as usual’?
Looking first to the macro drivers, with cases of coronavirus declining in China, our base case assumption is that the country will effectively return to normal in April.
However, whilst companies may officially resume work, utilisation rates will be low for several weeks due to the impact of supply chain disruptions, and, more importantly, labour shortages. Right now, data from the Chinese authorities on national passenger volumes doesn’t point to a significant return to work with rail and air passenger volumes at negligible levels and only a modest uptick in highway volumes. This suggests that as many as 150 million of China’s migrant workers remain in their home towns, rather than returning to work.
Steel
Our working assumption is for Chinese finished-steel consumption to decline by 2.8% in 2020. With a quick restart and government stimulus, demand might fall a mere 1%. But the longer the current situation continues, the more the downside risks stack up – our working assumption is for a bigger fall. People are not earning money. When they return to work, are they likely to spend? Will the government stimulate investment in steel-intensive infrastructure? Or divert budget to healthcare and compensation to businesses? If consumption is put on hold, then full-year steel demand declines are likely to be in the range of -2.5% to -5%.
We currently expect Chinese crude steel production to see a 2.4% decline in 2020. So far, Chinese steel production – particularly via the blast furnace (BF) and basic oxygen furnace (BOF) route – has not been impacted as severely as demand. But that seems set to change. We have recently spoken with 20 steelmakers who are experiencing production disruptions, primarily due to high finished steel inventories followed by a shortage of raw materials. Although Chinese steelmakers could raise utilisation later in the year, the reduction in demand means they probably won’t need to.
As the charts below show, weak demand and logistics constraints have caused steel inventories to skyrocket, especially longs. Even if logistics problems are resolved, steel inventories will not immediately deplete until demand picks up.
Iron ore
Iron ore fares relatively better than crude steel, because electric arc furnace (EAF) steelmaking and scrap bear the brunt of the impact – at least initially. We have changed our working assumption for Chinese consumption of iron ore in 2020 from +1.7% to -1.2%.
The flow through to iron ore pricing remains unclear, not least due to significant (unrelated) downward revisions to forecast seaborne supply in 2020, and uncertainty regarding the extent of Chinese domestic concentrate curtailments. It seems prudent to work on the basis that China’s seaborne iron ore requirement in 2020 will be at least 15 million tonnes lower than we previously thought.
Metallurgical coal
With the shortage in domestic Chinese supply for all metallurgical coal types, prices for imported coal have retained support.
Domestic supply continues to struggle. Labour and transport restrictions have curtailed deliveries from Shanxi, and a mine accident in Shandong is adding to near term disruption. Mongolian imports have slowed to a trickle since the border closure during February. Supply shortages in Australia and Canada helped to maintain this supply tightness in the seaborne trade. Between longwall movements and the loss of Moranbah North in Australia, and logistics issues from cold weather and protest disruptions in Canada, supply remained constricted from mid-January through February. Over the month, spot prices for Australian premium low volatile HCC averaged US$155/t, up from US$151/t in January. As supplies of premium coal dwindled late in February, prices breached US$162/t on the last trading day of the month.
Coking coal prices are set for a rollercoaster remainder of the year. High steel stocks are starting to limit production at blast furnaces, and coal supply looks set to improve from the middle of March. April looks likely to be a low point for prices, as coal supply normalises, and Mongolia reopens its borders. Improving steel demand in May through July – as construction sites restart – will help support coking coal prices. And the potential for sizeable Chinese stimulus from Q2 2020 provides some optimism that seaborne prices will be considerably higher by the end of the year, despite the possibility of prolonged virus impacts outside China.
Thermal coal
China’s domestic supply is recovering vigorously with nearly 78% of capacity back in operation, according to the NEA. The capacity utilisation rate continued to pick up and hit 65%, double what it was at the beginning of the month.
Meanwhile, demand for thermal coal is increasing. But with only a third of companies having restarted operations, demand is resuming much slower than supply. This is causing stockpiles at ports and power generating companies (gencos) to build, which places downward pressure on the Qinhuangdao 5,500 price. We forecast this price to remain on a downward trend through March as supply continues to outstrip demand.
We have downgraded our full-year Newcastle 6,000 price to US$67/tonne. Being most exposed to the Chinese market, Newcastle 5,500 high-ash and Indonesian coal prices will bear the brunt of the Chinese oversupply, hitting their lowest level in April and then staying low for the remainder of H1. These prices will in turn drag on the benchmark Newcastle 6,000 price as coal buyers switch to the lower cost coals where they can.
In Europe, coronavirus has begun to spread quickly, with Italy having over 2,000 cases to date. The ARA price, though, is likely to remain stable as it is already so deep into the cost curve. Rather it will be continuing low LNG prices and strong renewables generation keeping a lid on European coal prices.
Source: Wood Mackenzie
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Monday, 09 March 20
OPEC+ 'NO DEAL' A BLOW TO THE MARKET - WOOD MACKENZIE
Speaking after today’s OPEC+ meeting broke up, Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, said: “Today’s o ...
Monday, 09 March 20
KOREA EAST-WEST POWER INVITED BIDS FOR 150,000 MT OF MIN 4,400 - MAX 5,499 NAR COAL
COALspot.com: KOREA EAST-WEST POWER CO. LTD. of South Korea has issued an international tender for total 150,000 MT of LCV coal for May – Jun ...
Sunday, 08 March 20
SUPRAMAX: A 55,000DWT VESSEL FIXING DELIVERY FROM EAST KALIMANTAN FOR A TRIP TO VIETNAM AT $9,100 - BALTIC BRIEFING
SUPRAMAX/ULTRAMAX - A 56,000DWT VESSEL FIXED DELIVERY SOUTH CHINA TRIP VIA INDONESIA, REDELIVERY EAST COAST INDIA, IN THE $6,000S
SUPRAMAX/U ...
Friday, 06 March 20
CHINA RESUMES 83.4 PCT COAL PRODUCTION CAPACITY AMID EPIDEMIC - XINHUA
China has resumed 83.4 percent of its coal production capacity amid the fight against the novel coronavirus outbreak, the National Energy Administr ...
Friday, 06 March 20
COLOMBIAN COAL OUTPUT FELL 2% IN 2019 - REUTERS
Coal production in Colombia, the fifth-largest coal exporter in the world, fell 2% to 82.2 million tonnes in 2019 after output at one of the princi ...
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- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- SN Aboitiz Power Inc, Philippines
- Indian Oil Corporation Limited
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Krishnapatnam Port Company Ltd. - India
- SMC Global Power, Philippines
- London Commodity Brokers - England
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Dalmia Cement Bharat India
- CNBM International Corporation - China
- Planning Commission, India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Makarim & Taira - Indonesia
- Kaltim Prima Coal - Indonesia
- The State Trading Corporation of India Ltd
- Thiess Contractors Indonesia
- Attock Cement Pakistan Limited
- Deloitte Consulting - India
- Sojitz Corporation - Japan
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Coal and Oil Company - UAE
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Tamil Nadu electricity Board
- Samtan Co., Ltd - South Korea
- Australian Coal Association
- Ambuja Cements Ltd - India
- Orica Australia Pty. Ltd.
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- San Jose City I Power Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- PTC India Limited - India
- Holcim Trading Pte Ltd - Singapore
- Global Coal Blending Company Limited - Australia
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- Central Java Power - Indonesia
- Bangladesh Power Developement Board
- Carbofer General Trading SA - India
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Parliament of New Zealand
- Goldman Sachs - Singapore
- Videocon Industries ltd - India
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wilmar Investment Holdings
- Vedanta Resources Plc - India
- Economic Council, Georgia
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- Tata Chemicals Ltd - India
- McConnell Dowell - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Mercuria Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Formosa Plastics Group - Taiwan
- Meenaskhi Energy Private Limited - India
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- CIMB Investment Bank - Malaysia
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Asmin Koalindo Tuhup - Indonesia
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Eastern Coal Council - USA
- The University of Queensland
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Sarangani Energy Corporation, Philippines
- Bhatia International Limited - India
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Bhoruka Overseas - Indonesia
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Straits Asia Resources Limited - Singapore
- Metalloyd Limited - United Kingdom
- Oldendorff Carriers - Singapore
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- Meralco Power Generation, Philippines
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Minerals Council of Australia
- Uttam Galva Steels Limited - India
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
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