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Monday, 27 December 10
ANALYSIS: CHINA'S COAL PRODUCTION MISMATCHED WITH DOMESTIC DEMAND
 As reported by iStock Analyst, China's coal market has been trapped in a strange cycle. Large coal production bases are facing overcapacity, while large coal consumption provinces are in short supply of power coal.
This structural contradiction between supply and demand in China's coal market has highlighted heated discussions recently.
Coal producers facing mounting pressure of excess in output capacity
China is facing severe excess of production capacity and oversupply of coal in 2010 due to the expansion of coal production and surging imports amid sluggish demand, and this situation is expected to carry on into 2011 as new coal companies begin operation.
Wang Zhanjun, director-general of the China Coal (TSXV:CKO) Industry Association, said that China's coal supply capacity has seen a remarkable increase in 2010 due to the operation of newly formed coal companies after mergers and acquisitions.
In the first 11 months of 2010, the country's leading coal producing provinces and regions including Shanxi, Inner Mongolia, Shaanxi, and Ningxia all saw more than 20 percent growth in coal output.
According to a report by the association, in the first 11 months of 2010 China's coal output surged 15.5 percent or 418 million metric tons (tonnes) year on year to 3.039 billion tonnes, while coal sales were up 13.5 percent or 390 million tonnes to 2.892 billion tonnes. Coal deliveries increased by 15.3 percent year on year to 1.827 billion tonnes during the same period.
The investment in fixed assets in the coal industry has continued to increase this year. In the first 11 months of 2010, fixed assets investment in coal mining and washing saw 22.7 percent year-on-year growth to 320.7 billion yuan.
Meanwhile, China's coal imports keep rising while exports keep declining. In January-November, China's coal exports dropped 13.5 percent to 17.58 million tonnes, and are expected to remain low in December. Total coal exports are estimated at 19 million tonnes for the whole year.
In sharp contrast to declining exports, coal imports maintained fast growth in 2010. Net imports of coal are expected to reach 145 million tonnes in 2010.
However, China's coal demand has remained sluggish this year. Affected by the measures for energy conservation and emissions reduction, electricity consumption growth of high energy-consuming industries like ferrous metals, chemicals, non-ferrous metals, and building materials has fallen back quickly since May of 2010, which in turn has cut coal consumption severely.
Coal consumption in the steel industry moved from positive growth to negative growth in 2010.
According to official statistics, China's daily crude steel output saw fast growth in the first half of 2010 but registered three months of negative growth in the third quarter, and only increased 4.8 percent in November.
Also, coal consumption in the chemicals industry has also remained sluggish this year. According to preliminary forecasts, coal consumption in the chemicals industry in 2010 will stay at the same level as in 2009, at 140 million tonnes.
The China Electricity Council predicted that electricity demand in China would not increase much in 2010 and 2011, estimating the growth at 10 percent in 2010, 14 percentage points lower than in 2009.
Therefore, coal industry is expected to face mounting oversupply pressure in 2011 since the output of majority coal enterprises would double. Meanwhile, large numbers of coalmines in Shanxi, Henan, Shaanxi, and Inner Mongolia are scheduled to begin operation in 2011, and the coal oversupply will be aggravated by the participation of more downstream firms in power generation and metallurgy, said Wang Zhanjun, head of the China Coal Industry Association.
Wang predicted that coal supply in China would increase 300 million tonnes in 2011, and China would face excess in supply of coal.
Short supply of coal at power plants
In sharp contrast with the excessive output and supply of coal, a number of power plants in parts of China are suffering from shortages of power coal.
In Guizhou province, coal output capacity is significantly less than demand. The local coal output is expected to increase by 160 million tonnes at most in 2011, which would exacerbate the tight supply. This is because the output capacity of newly formed coalmines is inadequate to make up for eliminated production capacity, and the newly formed capacity will not come into operation until the second half of 2011.
At the same time, power plants in Guizhou cannot afford coal produced outside the province because of higher coal prices.
Similar short supply of coal has also occurred in Hubei province. Coal stocks at power plants in Hubei have remained at critical level since the beginning of this year, and sometimes were even not enough for one week's consumption.
The power coal shortage is not only a headache for power plants in non-coal production areas, but also hit power plants in major coal production areas like Shanxi and Henan.
Take the Datang Taiyuan Second Thermal Power Plant for example. The plant has suffered coal shortages four times since the beginning of 2010 because its contracted coal supplier supplied only 400,000 tonnes of coal towards meeting the 1.5-million-tonne coal contract.
As of December 4, power coal stocks of Henan have slid sharply from 3.84 million tonnes at the beginning of November to 2.65 million tonnes, far below the critical level of 3.5 million tonnes.
This has led to a daily supply shortage of 700,000 tonnes. Current coal production system might be primary cause
The short supply of power coal against excess of overall output capacity in China is believed to be caused mainly by system contradictions existing in the coal industry.
Actually, China's coal industry has trapped in a strange circle. Coal demand weakens after power plants stockpile power coal, but after the stockpiling, coal stocks of coal producers are down. Therefore, the coalmines produce more coal, which eventually leads to excess of output and excessive supply of coal.
Some coal suppliers have complained that if they carry on supplying coal according to their coal contracts with the power plants at the contracted price, the coalmines would all suffer (OOTC:WLVTQ) losses while the power plants all make profits.
A senior manager of the Shenhua Group said that it is difficult to avoid the structural contradictions of disjointed coal output and demand under the current government-capped management system. The outlook of China's coal industry remains troubled for 2011, and the problem of excessive output capacity would continue to be widespread in China, especially in western areas.
According to the manager, branches of the Shenhua Group in Xinjiang are all in the red due to heavy coal inventory pressure, while some provinces in east and south China are suffering from severe shortages of coal.
An insider with the Shanxi Coking Coal Group said that the group was ambitiously planning to double its output capacity during the period of the 12th Five Year Plan (2011-15), but the current market environment is very unfavorable for the coal industry. The cost of acquiring small coalmines has spiraled far beyond expectations.
Therefore, the mismatch between coal supply and demand at the turn of the new year is manageable, and the market is expected to see increasing supply and decreasing demand soon, noted the insider.
But Wang Xianzheng expressed disagreement. He believed that China's coal demand would increase by 200 million to 300 million tonnes in 2011. Besides which, the government-planned construction of 10 million units of affordable housing would drive coal demand by 60 million tonnes at least. Wang believed that the coal price would remain buoyant in 2011 but would not rise much.
Source: Quotemedia, Xinhua News Agency (Edited by Li Xiaohui), istockanalyst
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Tuesday, 14 November 23
CHINA'S BELT AND ROAD INITIATIVE TURNS AWAY FROM COAL - WOOD MACKENZIE
Ambitious, contentious and big spending, China’s Belt and Road Initiative (BRI) is 10 years old. In that time, China has splashed more than U ...
Friday, 10 November 23
THE COMMODITIES FEED: OIL UNDER PRESSURE - ING
Energy – Brent plummets
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and ...
Friday, 10 November 23
COAL USE AT U.S. POWER PLANTS CONTINUES DOWNWARD SPIRAL; FULL IMPACT ON MINES TO BE FELT IN 2024 - IEEFA
This year, the use of coal by the U.S.’s power producers has been so anemic that the fuel has not achieved a 20% market share in any month so ...
Friday, 10 November 23
INDIA: NATIONAL COAL INDEX RISES 3.83 POINTS IN SEPTEMBER AMID HIGHER DEMAND - LIVEMINT
The National Coal Index (NCI) rose 3.83 points to 143.91 in September amid growing demand for coal.
The union coal ministry on Tuesd ...
Thursday, 09 November 23
WE'RE PRODUCING TOO MUCH COAL, OIL AND GAS, REPORT SAYS - WSJ
World leaders pledged in 2015 to reduce emissions in a combined effort to limit climate change.
Now they are stepping up production ...
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- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- London Commodity Brokers - England
- Larsen & Toubro Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Petron Corporation, Philippines
- Gujarat Sidhee Cement - India
- Eastern Coal Council - USA
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
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- Independent Power Producers Association of India
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- OPG Power Generation Pvt Ltd - India
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
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- Cement Manufacturers Association - India
- Australian Coal Association
- IHS Mccloskey Coal Group - USA
- Directorate General of MIneral and Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Central Java Power - Indonesia
- Tata Chemicals Ltd - India
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- Medco Energi Mining Internasional
- Trasteel International SA, Italy
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- SMC Global Power, Philippines
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- Romanian Commodities Exchange
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Ministry of Transport, Egypt
- Anglo American - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Bangladesh Power Developement Board
- Coastal Gujarat Power Limited - India
- Bukit Makmur.PT - Indonesia
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- White Energy Company Limited
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Minerals Council of Australia
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Economic Council, Georgia
- Mercator Lines Limited - India
- Borneo Indobara - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Directorate Of Revenue Intelligence - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Latin American Coal - Colombia
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- Orica Mining Services - Indonesia
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- Eastern Energy - Thailand
- Standard Chartered Bank - UAE
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Mjunction Services Limited - India
- Mercuria Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Karaikal Port Pvt Ltd - India
- VISA Power Limited - India
- Straits Asia Resources Limited - Singapore
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Orica Australia Pty. Ltd.
- Thai Mozambique Logistica
- Oldendorff Carriers - Singapore
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Vizag Seaport Private Limited - India
- Global Coal Blending Company Limited - Australia
- Planning Commission, India
- Bahari Cakrawala Sebuku - Indonesia
- Tamil Nadu electricity Board
- Pendopo Energi Batubara - Indonesia
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Chamber of Mines of South Africa
- LBH Netherlands Bv - Netherlands
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Sakthi Sugars Limited - India
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Bukit Baiduri Energy - Indonesia
- Gujarat Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Goldman Sachs - Singapore
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Global Business Power Corporation, Philippines
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
- Kumho Petrochemical, South Korea
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Salva Resources Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
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