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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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Friday, 02 August 24
COAL MARKET DEVELOPMENTS: FALLING PRICES AMID RECORD-HIGH OUTPUT - WORLD BANK
Coal prices inched up in May (m/m) following an 8 percent decline in 2024Q1. The Australian and South African benchmarks have plummeted more ...
Friday, 26 July 24
FUELEU MARITME IS COMING. IS YOUR CHARTERPARTY READY? - GARD
With less than six months to implementation of FuelEU Maritime in EU and EEA trades, there has been little published advice regarding how to alloca ...
Thursday, 04 July 24
INDIA'S COAL PRODUCTION RISES 14% IN JUNE - PTI
The country’s coal production rose by 14.49% to 84.63 million tonne (MT) in June. The country’s coal output was 73.92 MT in June last f ...
Tuesday, 02 July 24
NTPC CAPTIVE COAL OUTPUT GROWS 15% IN Q1; DESPATCH RISES 17%
State-owned NTPC on Monday reported a 15 per cent year-on-year increase in the production of coal from captives mines to 9.862 metric million tonne ...
Friday, 28 June 24
KOSPO INVITED BIDS FOR 400,000 MT OF MINIMUM 4000 NCV COAL FOR FIVE YEARS
Korea Southern Power Co., Ltd. (KOSPO), is inviting bids for total 400,000 MT of Low Calorific Value Coal for 5 years starting from July 2024 until ...
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- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- Rio Tinto Coal - Australia
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- IHS Mccloskey Coal Group - USA
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- Coastal Gujarat Power Limited - India
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ASAPP Information Group - India
- Therma Luzon, Inc, Philippines
- Iligan Light & Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Global Coal Blending Company Limited - Australia
- Singapore Mercantile Exchange
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Siam City Cement PLC, Thailand
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Medco Energi Mining Internasional
- Bharathi Cement Corporation - India
- Semirara Mining Corp, Philippines
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Chettinad Cement Corporation Ltd - India
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Oldendorff Carriers - Singapore
- New Zealand Coal & Carbon
- Marubeni Corporation - India
- Australian Commodity Traders Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Planning Commission, India
- Ind-Barath Power Infra Limited - India
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Australian Coal Association
- Energy Development Corp, Philippines
- Dalmia Cement Bharat India
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Globalindo Alam Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- GMR Energy Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Thiess Contractors Indonesia
- Riau Bara Harum - Indonesia
- Georgia Ports Authority, United States
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Parliament of New Zealand
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Mjunction Services Limited - India
- Toyota Tsusho Corporation, Japan
- The University of Queensland
- Sarangani Energy Corporation, Philippines
- Posco Energy - South Korea
- Leighton Contractors Pty Ltd - Australia
- Bhushan Steel Limited - India
- Billiton Holdings Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- Port Waratah Coal Services - Australia
- Banpu Public Company Limited - Thailand
- Kaltim Prima Coal - Indonesia
- Vedanta Resources Plc - India
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- Altura Mining Limited, Indonesia
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Orica Australia Pty. Ltd.
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Bhatia International Limited - India
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Barasentosa Lestari - Indonesia
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Eastern Energy - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- Central Electricity Authority - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- Antam Resourcindo - Indonesia
- Makarim & Taira - Indonesia
- Wilmar Investment Holdings
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- McConnell Dowell - Australia
- Interocean Group of Companies - India
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Aditya Birla Group - India
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Kobexindo Tractors - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cement Manufacturers Association - India
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Thai Mozambique Logistica
- London Commodity Brokers - England
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Commonwealth Bank - Australia
- Uttam Galva Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Larsen & Toubro Limited - India
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- MS Steel International - UAE
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Vizag Seaport Private Limited - India
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
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