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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, 31 December 10
STC TO FINALIZE 12 MILLION MT OF COAL IMPORT CONTRACT TO TWO INDIAN AND A DUBAI BASED COAL TRADER - SOURCES
COALspot.com - World's single largest coal import tender floated by STC on behalf of state utility NTPC to finalize its suppliers or already finali ...
Thursday, 30 December 10
DRY BULK MARKET STAYS SUBDUED AT THE END OF 2010 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dy bulk market failed to cheer ship owners across the board as the year draws to an end, thus bringing mixed feelings ahead of 2011. On one hand ...
Thursday, 30 December 10
KANGAROO RESOURCES BUYS INDONESIAN COAL COMPANY
Australian-listed Kangaroo Resources Ltd. said Wednesday it will buy 99% of the Pakar thermal coal project in East Kalimantan, for A$277 million thr ...
Wednesday, 29 December 10
WEATHER IMPACTS RIO TINTO COAL AUSTRALIAS QUEENSLAND OPERATIONS
Press Release - As a result of severe monsoonal rain in central and northern Queensland, force majeure has been declared on coal sales contracts fro ...
Monday, 27 December 10
HUNT FOR OVERSEAS COAL ASSETS TO INTENSIFY - FINANCIAL EXPRESS
Financial Express reported that, With the Indian economy back on the track after the slowdown, merger and acquisition (M&A) activities in the re ...
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- Jaiprakash Power Ventures ltd
- Parry Sugars Refinery, India
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- The Treasury - Australian Government
- PTC India Limited - India
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
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- Ministry of Mines - Canada
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- Banpu Public Company Limited - Thailand
- Posco Energy - South Korea
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- Indian Energy Exchange, India
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- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
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- Wood Mackenzie - Singapore
- Economic Council, Georgia
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- Malabar Cements Ltd - India
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- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- TeaM Sual Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- PowerSource Philippines DevCo
- Global Coal Blending Company Limited - Australia
- The University of Queensland
- Bhatia International Limited - India
- Kobexindo Tractors - Indoneisa
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Larsen & Toubro Limited - India
- Leighton Contractors Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- ASAPP Information Group - India
- MS Steel International - UAE
- Sakthi Sugars Limited - India
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- White Energy Company Limited
- Indogreen Group - Indonesia
- Binh Thuan Hamico - Vietnam
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- Straits Asia Resources Limited - Singapore
- Indian Oil Corporation Limited
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- Bukit Makmur.PT - Indonesia
- Bulk Trading Sa - Switzerland
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- Planning Commission, India
- SN Aboitiz Power Inc, Philippines
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- Globalindo Alam Lestari - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Energy Link Ltd, New Zealand
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- Sojitz Corporation - Japan
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
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- Siam City Cement - Thailand
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- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Commonwealth Bank - Australia
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- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Minerals Council of Australia
- Singapore Mercantile Exchange
- Kumho Petrochemical, South Korea
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Formosa Plastics Group - Taiwan
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- LBH Netherlands Bv - Netherlands
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Petron Corporation, Philippines
- Ambuja Cements Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- Riau Bara Harum - Indonesia
- VISA Power Limited - India
- Savvy Resources Ltd - HongKong
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Billiton Holdings Pty Ltd - Australia
- Neyveli Lignite Corporation Ltd, - India
- India Bulls Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- San Jose City I Power Corp, Philippines
- Energy Development Corp, Philippines
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
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- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Mercator Lines Limited - India
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- Port Waratah Coal Services - Australia
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- Kideco Jaya Agung - Indonesia
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