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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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Wednesday, 05 January 11
HIGHER COAL PRICES LIFT UP COAL STOCKS
Thermal coal price this month has gone up 5.63% to US$127.70 per ton today from mid last month at US$120.89 per ton.
Thermal coal price for next ...
Wednesday, 05 January 11
BUKIT ASAM TARGETS 20% BUY TO GROW COAL TRANSPORT CAPACITY - THE JAKARTA GLOBE
The Jakarta Globe reported that, Indonesian coal producer Tambang Batubara Bukit Asam is considering buying an additional 20 percent stake in Bukit ...
Wednesday, 05 January 11
FLOODING IN AUSTRALIA WILL CAUSE COAL PRICES TO SPIKE AT LEAST 20 PERCENT
Rising coal prices are set to spike at least 20 per cent higher because of supply shortages due to severe flooding in Australia, adding cost pressur ...
Wednesday, 05 January 11
DRY BULK MARKET BEGINS NEW YEAR ON SOUR NOTE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Seasonal factors like the worst flooding in Australia’s Queensland in half a century, coupled with thin trade activity has put the dry bulk ma ...
Tuesday, 04 January 11
THE WCI-CHINA ROUTE WAS TRADED IN THE MID US$ 10,000S - BRS DRY BULK
As reported by BRS Dry Bulk, after a stronger than expected performance in 2010, rates finished on a sombre note in December with the BDI at1,773 po ...
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- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Metalloyd Limited - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Sarangani Energy Corporation, Philippines
- Videocon Industries ltd - India
- Dalmia Cement Bharat India
- Parry Sugars Refinery, India
- Baramulti Group, Indonesia
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Simpson Spence & Young - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indika Energy - Indonesia
- Ministry of Finance - Indonesia
- Mjunction Services Limited - India
- Economic Council, Georgia
- Toyota Tsusho Corporation, Japan
- IHS Mccloskey Coal Group - USA
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Mintek Dendrill Indonesia
- Xindia Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- Electricity Generating Authority of Thailand
- Riau Bara Harum - Indonesia
- Iligan Light & Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Star Paper Mills Limited - India
- Ministry of Mines - Canada
- Posco Energy - South Korea
- Heidelberg Cement - Germany
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Mercator Lines Limited - India
- Rio Tinto Coal - Australia
- Vizag Seaport Private Limited - India
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Renaissance Capital - South Africa
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Port Waratah Coal Services - Australia
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Georgia Ports Authority, United States
- Meenaskhi Energy Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- European Bulk Services B.V. - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Savvy Resources Ltd - HongKong
- Kartika Selabumi Mining - Indonesia
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Petron Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Samtan Co., Ltd - South Korea
- Gujarat Sidhee Cement - India
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Holcim Trading Pte Ltd - Singapore
- Larsen & Toubro Limited - India
- International Coal Ventures Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- Global Coal Blending Company Limited - Australia
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Bharathi Cement Corporation - India
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Indogreen Group - Indonesia
- Australian Coal Association
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- The Treasury - Australian Government
- Deloitte Consulting - India
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- The State Trading Corporation of India Ltd
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Thai Mozambique Logistica
- Sindya Power Generating Company Private Ltd
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- Sojitz Corporation - Japan
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Minerals Council of Australia
- South Luzon Thermal Energy Corporation
- Binh Thuan Hamico - Vietnam
- Bank of Tokyo Mitsubishi UFJ Ltd
- Anglo American - United Kingdom
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Singapore Mercantile Exchange
- Karaikal Port Pvt Ltd - India
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Borneo Indobara - Indonesia
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- SMG Consultants - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Standard Chartered Bank - UAE
- Cigading International Bulk Terminal - Indonesia
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Agrawal Coal Company - India
- Indonesian Coal Mining Association
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- London Commodity Brokers - England
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Planning Commission, India
- OPG Power Generation Pvt Ltd - India
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- New Zealand Coal & Carbon
- Romanian Commodities Exchange
- Timah Investasi Mineral - Indoneisa
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