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Tuesday, 08 October 13
CHINA: INTENSE COMPETITION AMONG DOMESTIC COAL MINERS AS 2013 IMPORT DEMAND REMAINS STRONG - WOOD MACKENZIE
 Prices will not fall under RMB500/t or risk supply availability to the coastal market
Despite China's lower economic growth, Wood Mackenzie says that import demand will still meet previous high expectations, although overall demand growth will be lower. This is due to lower seaborne coal prices compared to domestic coal prices in coastal China. As such, domestic producers are competing for market share by lowering prices in spite of negative margins. This explains the recent continuous drop in Chinese coal prices. However, Wood Mackenzie says that coastal China coal prices will be supported at *RMB500 per tonne (t) as at this price level 40% of domestic supply operates at negative margins.
China's gross domestic product (GDP) growth has slowed from 9.3% to 7.5% from 2011 to 2013. As a result, power demand growth has slowed in China and coal demand in coastal provinces has remained flat, staying at 2011 levels of 1.2 billion tonnes(Bt). In contrast, seaborne demand increased rapidly - This year, Wood Mackenzie expects China to import 235Mt of thermal and 67Mt of metallurgical coal, up from 168Mt and 31Mt respectively in 2011. This translates to a growth in share of seaborne imports into coastal China from 17% to about 25% between 2011 to 2013.
Wood Mackenzie's Senior Analyst Coal Market Research, Mr. Prakash Sharma says, "The trend of increased coal imports has been aided by weak coal prices in the international market. This means that Chinese coal import demand is almost entirely driven by the competitiveness of imported versus domestic supply. As such, large Chinese miners are adopting volume strategy by producing more to bring down operating costs and pricing lower to maintain market share."
These measures will hold market share in the short-term but may be counter-effective if prices fall too low in coastal China. Therefore we believe prices find a floor at RMB500/t. Small to medium sized domestic players will be most affected due to relatively high fixed labour costs and mine safety expenses in China. Large producers such as Shenhua and China Coal, who have resorted to aggressive pricing, contribute almost 50% of China's domestic coal production. The remainder 50% comes from the small to medium size miners.
Rohan Kendall, Senior Analyst for Coal Supply Research, says, "At RMB 500/t, we estimate that 40% of China's thermal coal production will produce at negative margins. Small to medium sized producers operating at negative margins, particularly those producing low-energy coal, face a real risk of mine closures. The situation may also trigger further consolidation of small loss-making mines in China."
Summarizing, Mr Sharma says, "The 40% of domestic production producing at negative margins equates to about 150% of the size of the current seaborne market. Full replacement volumes cannot feasibly be sourced from imports without creating a price response that will actually incentivise domestic miners to remain in production. Therefore, we believe prices will be supported above RMB 500/t, turning the tide on the current price trend."
*All prices refer to benchmark FOB Qinghuangdao Thermal coal price (5500 kcal/kg NAR basis) inclusive of 17% VAT.
Editor's notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world's energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com
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Tuesday, 17 September 13
BUMA PRODUCED 3.57 PERCENT MORE COAL IN AUGUST
COALspot.com: BUMA has removed totaled 25.20 million bcm of overburden to produce 2.90 million tons coal in August 2013. BUMI produced 3.07 percent ...
Tuesday, 17 September 13
NEWCASTLE PORT SHIPPED ABOUT 27 PERCENT MORE COAL WEEK ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 27.26 per cent week on week to 3.01 million mt for ...
Tuesday, 17 September 13
TAIPOWER INVITES BIDS FOR SUPPLY OF SUB-BITUMINOUS COAL
COALspot.com - Taiwan Power Company intends to procure 1.050 million tons of sub-bituminous coal for Taipower thermal power plant through open tende ...
Tuesday, 17 September 13
ORPHEUS SECURES SIGNIFICANT INFRASTRUCTURE DEAL THROUGH ACQUISITION OF SOUTH KALIMANTAN PORT CAPACITY
COALspot.com : Orpheus Energy Limited (ASX: OEG) of Australia has today announced that, it has executed a binding agreement with the proprietor of S ...
Monday, 16 September 13
WHAT RECOVERY MEANS FOR THE CAPESIZE MARKET - COMMODORE RESEARCH
COALspot.com: The simple fact that capesize rates have been able to increase above the $9,000/mark and become much more responsive to changes in car ...
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- Altura Mining Limited, Indonesia
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- Alfred C Toepfer International GmbH - Germany
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- Siam City Cement PLC, Thailand
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- Australian Commodity Traders Exchange
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- Renaissance Capital - South Africa
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- Krishnapatnam Port Company Ltd. - India
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- Karaikal Port Pvt Ltd - India
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- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
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- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
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- Planning Commission, India
- Romanian Commodities Exchange
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- Kepco SPC Power Corporation, Philippines
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- Samtan Co., Ltd - South Korea
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- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
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- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
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- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
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- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
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- Metalloyd Limited - United Kingdom
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
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- TeaM Sual Corporation - Philippines
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- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Minerals Council of Australia
- CNBM International Corporation - China
- Siam City Cement - Thailand
- GMR Energy Limited - India
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
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- Electricity Generating Authority of Thailand
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- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Larsen & Toubro Limited - India
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- Edison Trading Spa - Italy
- Attock Cement Pakistan Limited
- Orica Australia Pty. Ltd.
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- MS Steel International - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- Africa Commodities Group - South Africa
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercator Lines Limited - India
- Wilmar Investment Holdings
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- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Xindia Steels Limited - India
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Georgia Ports Authority, United States
- Goldman Sachs - Singapore
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Standard Chartered Bank - UAE
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
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- Aditya Birla Group - India
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- Sinarmas Energy and Mining - Indonesia
- Barasentosa Lestari - Indonesia
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- Agrawal Coal Company - India
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- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Sakthi Sugars Limited - India
- Directorate General of MIneral and Coal - Indonesia
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