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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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Sunday, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Planning Commission, India
- Ministry of Mines - Canada
- Thai Mozambique Logistica
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Mjunction Services Limited - India
- Kumho Petrochemical, South Korea
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- Maheswari Brothers Coal Limited - India
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- International Coal Ventures Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Baramulti Group, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- MS Steel International - UAE
- Independent Power Producers Association of India
- White Energy Company Limited
- TeaM Sual Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Mintek Dendrill Indonesia
- Metalloyd Limited - United Kingdom
- Bulk Trading Sa - Switzerland
- Orica Australia Pty. Ltd.
- Bhatia International Limited - India
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Directorate Of Revenue Intelligence - India
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Madhucon Powers Ltd - India
- Wood Mackenzie - Singapore
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Posco Energy - South Korea
- Sical Logistics Limited - India
- Indika Energy - Indonesia
- GVK Power & Infra Limited - India
- Trasteel International SA, Italy
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Lanco Infratech Ltd - India
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- The Treasury - Australian Government
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Parliament of New Zealand
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Kideco Jaya Agung - Indonesia
- Dalmia Cement Bharat India
- Neyveli Lignite Corporation Ltd, - India
- Romanian Commodities Exchange
- Electricity Generating Authority of Thailand
- Indonesian Coal Mining Association
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Indian Oil Corporation Limited
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Petrochimia International Co. Ltd.- Taiwan
- Parry Sugars Refinery, India
- SN Aboitiz Power Inc, Philippines
- Grasim Industreis Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Antam Resourcindo - Indonesia
- PowerSource Philippines DevCo
- Coal and Oil Company - UAE
- Manunggal Multi Energi - Indonesia
- VISA Power Limited - India
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Sree Jayajothi Cements Limited - India
- Sinarmas Energy and Mining - Indonesia
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Cement Manufacturers Association - India
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- CNBM International Corporation - China
- Bharathi Cement Corporation - India
- Economic Council, Georgia
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Kartika Selabumi Mining - Indonesia
- PTC India Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- Petron Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Minerals Council of Australia
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- Samtan Co., Ltd - South Korea
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Gujarat Sidhee Cement - India
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
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