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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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Thursday, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Georgia Ports Authority, United States
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Eastern Coal Council - USA
- Larsen & Toubro Limited - India
- Carbofer General Trading SA - India
- VISA Power Limited - India
- Xindia Steels Limited - India
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Binh Thuan Hamico - Vietnam
- ASAPP Information Group - India
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
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- Pipit Mutiara Jaya. PT, Indonesia
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Commonwealth Bank - Australia
- GVK Power & Infra Limited - India
- Edison Trading Spa - Italy
- AsiaOL BioFuels Corp., Philippines
- Borneo Indobara - Indonesia
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Merrill Lynch Commodities Europe
- Siam City Cement PLC, Thailand
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- MS Steel International - UAE
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- Mintek Dendrill Indonesia
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Thiess Contractors Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- International Coal Ventures Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Indo Tambangraya Megah - Indonesia
- Indonesian Coal Mining Association
- Indian Energy Exchange, India
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Orica Mining Services - Indonesia
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Latin American Coal - Colombia
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Formosa Plastics Group - Taiwan
- London Commodity Brokers - England
- Kepco SPC Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Asmin Koalindo Tuhup - Indonesia
- PNOC Exploration Corporation - Philippines
- Aditya Birla Group - India
- Cement Manufacturers Association - India
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Wilmar Investment Holdings
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- Ind-Barath Power Infra Limited - India
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Central Java Power - Indonesia
- Anglo American - United Kingdom
- Bulk Trading Sa - Switzerland
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- White Energy Company Limited
- Vedanta Resources Plc - India
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- European Bulk Services B.V. - Netherlands
- Rashtriya Ispat Nigam Limited - India
- Iligan Light & Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Electricity Authority, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Miang Besar Coal Terminal - Indonesia
- The State Trading Corporation of India Ltd
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Singapore Mercantile Exchange
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Goldman Sachs - Singapore
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Simpson Spence & Young - Indonesia
- Parry Sugars Refinery, India
- ICICI Bank Limited - India
- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- Riau Bara Harum - Indonesia
- Jorong Barutama Greston.PT - Indonesia
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