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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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Monday, 26 August 13
CARRIAGE OF COAL CARGOES FROM KALIMANTAN, INDONESIA - WEST OF ENGLAND P&I CLUB
The Club has recently been advised by consulting scientists and engineers Dr J H Burgoyne and Partners (International) Limited that the number of in ...
Sunday, 25 August 13
API 8 CFR SOUTH CHINA COAL: HEADING TO NORTH
COALspot.com – Sub-Bit Indonesia coal swaps (FOB ) for average Q4 2013 delivery US$ 2.39 up month on month. The swap was moved positive ...
Sunday, 25 August 13
THE FREIGHT MARKET S7 & S8 SECTOR IS EXPECTED TO BE STEADY/FIRM NEXT WEEK - VISTAAR
COALspot.com - The freight market continued to be firm with all indices moved positive except for Panamax which was slightly down (2 pct down).
T ...
Friday, 23 August 13
US PRODUCED MORE COAL WEEK ON WEEK - EIA
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.80 million short tons (mmst) of ...
Thursday, 22 August 13
PANAMAX : PERIOD MARKET IS STILL BEING LED BY STRONGER SENTIMENT IN THE FFA'S - FEARNRESEARCH
Handy
This week started slowly as expected. Indo biz now rate APS around 7k +60k to china and around 8k+80k to India. However, there are some ships ...
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- Energy Link Ltd, New Zealand
- Antam Resourcindo - Indonesia
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- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Posco Energy - South Korea
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- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karaikal Port Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
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- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Semirara Mining Corp, Philippines
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- Toyota Tsusho Corporation, Japan
- Global Business Power Corporation, Philippines
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- Maharashtra Electricity Regulatory Commission - India
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- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
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- Carbofer General Trading SA - India
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
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- Marubeni Corporation - India
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- Bahari Cakrawala Sebuku - Indonesia
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- Sojitz Corporation - Japan
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- Ceylon Electricity Board - Sri Lanka
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- Riau Bara Harum - Indonesia
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- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Mjunction Services Limited - India
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- Rashtriya Ispat Nigam Limited - India
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- Jindal Steel & Power Ltd - India
- Kohat Cement Company Ltd. - Pakistan
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- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
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- Cigading International Bulk Terminal - Indonesia
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- The University of Queensland
- GVK Power & Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
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- Electricity Generating Authority of Thailand
- Cement Manufacturers Association - India
- Eastern Energy - Thailand
- LBH Netherlands Bv - Netherlands
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
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- Australian Coal Association
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- Bulk Trading Sa - Switzerland
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- Attock Cement Pakistan Limited
- New Zealand Coal & Carbon
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- Petrochimia International Co. Ltd.- Taiwan
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- Formosa Plastics Group - Taiwan
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
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- Siam City Cement PLC, Thailand
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- The State Trading Corporation of India Ltd
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
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- Bangladesh Power Developement Board
- Straits Asia Resources Limited - Singapore
- Trasteel International SA, Italy
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Grasim Industreis Ltd - India
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Larsen & Toubro Limited - India
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Bayan Resources Tbk. - Indonesia
- Central Electricity Authority - India
- Economic Council, Georgia
- Uttam Galva Steels Limited - India
- Xindia Steels Limited - India
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- Anglo American - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Makarim & Taira - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- Jorong Barutama Greston.PT - Indonesia
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Commonwealth Bank - Australia
- CNBM International Corporation - China
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- White Energy Company Limited
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- Singapore Mercantile Exchange
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
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- Thiess Contractors Indonesia
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- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
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- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
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