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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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Saturday, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
A shift in imports from Asia to Europe led to significant volatility in liquefied natural gas shipping last year, prompting industry experts to urg ...
Friday, 17 March 23
INDONESIAN COAL PRICE REFERENCE UP AROUND 2.17% IN MARCH 2023
COALspot.com: Indonesian Coal Price Reference up around 2.17% in March 2023.
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Saturday, 11 March 23
MARKET INSIGHT - INTERMODAL
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Wednesday, 08 March 23
INDONESIAN COAL REFERENCE PRICE FORMULA HAS OFFICIALLY CHANGED
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Thursday, 02 March 23
INDIA'S SEABORNE CRUDE OIL IMPORTS IN 2022 INCREASED BY 11.5% YOY - BANCHERO COSTA
2022 has turned out to be a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession, Banchero Costa ...
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- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- The University of Queensland
- PowerSource Philippines DevCo
- Grasim Industreis Ltd - India
- Wilmar Investment Holdings
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Gujarat Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Parliament of New Zealand
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- Cement Manufacturers Association - India
- Chettinad Cement Corporation Ltd - India
- Barasentosa Lestari - Indonesia
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- Directorate Of Revenue Intelligence - India
- MS Steel International - UAE
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aditya Birla Group - India
- PNOC Exploration Corporation - Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- Tamil Nadu electricity Board
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Global Coal Blending Company Limited - Australia
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Standard Chartered Bank - UAE
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Karbindo Abesyapradhi - Indoneisa
- Interocean Group of Companies - India
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- India Bulls Power Limited - India
- Siam City Cement PLC, Thailand
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Meenaskhi Energy Private Limited - India
- Wood Mackenzie - Singapore
- Mintek Dendrill Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Power Finance Corporation Ltd., India
- Kepco SPC Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- Port Waratah Coal Services - Australia
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Economic Council, Georgia
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Semirara Mining Corp, Philippines
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Sical Logistics Limited - India
- Karaikal Port Pvt Ltd - India
- Minerals Council of Australia
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMG Consultants - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Vizag Seaport Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- McConnell Dowell - Australia
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Jaiprakash Power Ventures ltd
- Gujarat Mineral Development Corp Ltd - India
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Bukit Baiduri Energy - Indonesia
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Mercuria Energy - Indonesia
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Georgia Ports Authority, United States
- Indika Energy - Indonesia
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sarangani Energy Corporation, Philippines
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Bangladesh Power Developement Board
- Makarim & Taira - Indonesia
- Mjunction Services Limited - India
- Altura Mining Limited, Indonesia
- Electricity Generating Authority of Thailand
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Romanian Commodities Exchange
- Bukit Makmur.PT - Indonesia
- Star Paper Mills Limited - India
- Australian Commodity Traders Exchange
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Thai Mozambique Logistica
- Savvy Resources Ltd - HongKong
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
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