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Friday, 28 March 14
CHINA'S ENVIRONMENTAL MEASURES WILL NOT CURB GROWTH IN DOMESTIC STEEL PRODUCTION AND SEABORNE IRON ORE - WOOD MACKENZIE SAYS
 Steel plants in China have been targeted as a major source of the toxic smog enveloping Beijing and Shanghai. Emergency measures have been imposed on regional steelmakers with mills in Tangshan ordered to suspend at least 30% of production and idle coke batteries and sintering operations. Longer term measures include the introduction of more stringent emission controls. Wood Mackenzie notes that although this move has created market wariness for China steel production and iron ore demand, the impact on steel production will be minimal. This is because there is plenty of unused capacity within China's steel industry ready to replace any lost production, due to shut downs resulting from enforcement of the new emissions regulations. However, improving the environmental performance of Chinese steel plants will add further cost pressure to an already ailing industry. Mr Paul Gray, Principal Iron Ore Markets Analyst at Wood Mackenzie says, "The iron ore market is understandably spooked by what's going on in China due to the introduction of the environmental controls and their potential financial impact on the steel industry. This has sparked much uncertainty and speculation. This is one factor that has caused price volatility, with prices plunging to 17 month lows in recent weeks before picking up again very recently. However, during the remainder of 2014 we expect that fighting emissions will have negligible impact on total Chinese crude steel production and limited impact on iron ore demand in terms of quantity, with Chinese imports of iron ore predicted to rise by a further 90 million tonnes (Mt) in 2014 to a record 921Mt."
Dr He Ming, Steel Cost Consultant at Wood Mackenzie, adds, "Steel companies need to put emissions control measures in place. However, given that most Chinese plants are tight on capital after years of near-zero margins, they will struggle with the additional costs required to implement the necessary measures and many companies will be looking for a way to pass the cost onto consumers." To achieve emissions levels on a par with their counterparts in Japan or South Korea, most steel plants would have to invest and incur more than RMB 50-60/t (US$8.3-10/t) of additional operating cost, further eroding their already narrow margins. This comes following the announcement that the average net profit margin at steelmakers in 2013 was just over 0.64% for 86 of China Iron and Steel Association's (CISA) key steel enterprises.
If steel companies are unable to meet the new lower emissions targets, they may be forced to temporarily or even permanently shut production but Wood Mackenzie expects the targets will have more impact on small scale non-CISA steel plants. These smaller plants have outdated emissions control facilities and are estimated to have emission levels three to four times higher than their CISA counterparts. Dr He says, "Non-CISA steel plants contributed to less than 20% of China's steel production in 2013 therefore although an aggressive plan of capacity closures has been announced by the central and local governments, the scale of closures is expected to have a limited impact on a steel industry that is suffering from chronic overcapacity."
"Additionally, most of the announced closures to date have been for capacity already idled or curtailed for other reasons, with the lost production picked up by the larger steel plants. It is unlikely that we will see forced closures amongst the larger plants as this move will not reduce emissions significantly. Moreover, it will have a detrimental effect on local economies by creating large numbers of unemployed workers and unpaid debts. This is not ideal, especially since Xi Jinping's government is encouraging a market-based economy with increased domestic consumer power. Therefore we do not expect closures of the larger scale plants to be the next step enforced."
With the concept that environmental regulations will apply to each steel plant fairly, regardless of size or whether it is privately or state-owned, this would shift the entire Chinese steel industry cost curve higher and further erode margins. It is therefore likely that these incremental cost increases will be passed on to end users. Moreover, since sintering is the most polluting process within a steel plant, some plants will look to replace sinter rather than incur the additional operating costs required to meet new emissions standards. Sintering is responsible for 80%-90% of total dust and soot emissions and more than 60% of total sulfur emissions from the steel industry.
Wood Mackenzie anticipates that replacements for the sintering process will result in an increase in demand for the more expensive, higher quality and environmentally-friendly raw materials like iron ore lump and pellet; supporting higher premiums for these products. There will be a natural cap on how much capacity can be switched away from sinter to higher quality feed as the price premium will become equal to the additional cost of implementing the necessary environmental measures.
The limited impact on steel production accounts for the minimal consequences for iron ore demand. Mr Gray adds, "Of longer term significance is the seaborne market's anticipated transition as it moves towards a position of excess supply capability when Chinese demand struggles to absorb all the additional seaborne supply earmarked for the this year and next. 2014 will certainly be a transition year for iron ore but we think this is not necessarily related to China's environmental measures it's more symptomatic of rising Australian supply and slowing Chinese demand."
Dr He concludes, "Government and steel companies will need to work together to protect the industry while still gradually improving emissions. On the company-side, we expect China's larger steel plants will take alternative measures to meet environmental requirements but they will incur extra costs of implementing emissions control facilities in the longer term. On the government side, a more effective way to curb pollution is to improve monitoring methods at individual plants. This will enable the government to impose heavy fines on those with emissions beyond a well-defined threshold, while incentivising those with lesser emission levels by offering subsidies to offset extra costs incurred."
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, 07 April 14
WEEKLY SUB-BIT FOB INDONESIA COAL SWAP CLAIMS EDGE FALL; TREND NEGATIVE
COALspot.com: Indonesian coal swaps for average Q4’ 2014 lost on month, day and on week according to AsiaClear OTC coal swap's reports ...
Monday, 07 April 14
API 8 CFR SOUTH CHINA COAL SWAPS GAINED 2.09% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries gained 2.09 percent month on month and closed at US$ 75.68 per ...
Sunday, 06 April 14
THE FREIGHT MARKET KEEPS SLIDING
COALspot.com: The freight market continued to drop this week. The BDI (Baltic Dry Index) is a widely followed metric that reflects the overall r ...
Friday, 04 April 14
UNITED STATES COAL OUTPUT UP 5.4% IN PAST WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.9 million short tons (mmst) of coal i ...
Thursday, 03 April 14
PANAMAX SECTOR IS WATCHING A SEVERE DROP IN RATES - FEARNLEYS
Handy
A further weaker sentiment for the Supras as well in both hemispheres this week with oversupply of tonnage being the major headline. Tra ...
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- ASAPP Information Group - India
- Bharathi Cement Corporation - India
- Indo Tambangraya Megah - Indonesia
- Sojitz Corporation - Japan
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Leighton Contractors Pty Ltd - Australia
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Indika Energy - Indonesia
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Ambuja Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Oldendorff Carriers - Singapore
- Deloitte Consulting - India
- Bangladesh Power Developement Board
- Sindya Power Generating Company Private Ltd
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Kumho Petrochemical, South Korea
- Uttam Galva Steels Limited - India
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Sidhee Cement - India
- PTC India Limited - India
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- White Energy Company Limited
- Karbindo Abesyapradhi - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Global Coal Blending Company Limited - Australia
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Jaiprakash Power Ventures ltd
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Central Electricity Authority - India
- Directorate General of MIneral and Coal - Indonesia
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Baramulti Group, Indonesia
- Siam City Cement PLC, Thailand
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Edison Trading Spa - Italy
- Aditya Birla Group - India
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- Romanian Commodities Exchange
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Minerals Council of Australia
- Electricity Generating Authority of Thailand
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Energy Link Ltd, New Zealand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Miang Besar Coal Terminal - Indonesia
- GVK Power & Infra Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ICICI Bank Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Salva Resources Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Jindal Steel & Power Ltd - India
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
- Wood Mackenzie - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Kartika Selabumi Mining - Indonesia
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- SMC Global Power, Philippines
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- Bulk Trading Sa - Switzerland
- Sree Jayajothi Cements Limited - India
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- Economic Council, Georgia
- Siam City Cement - Thailand
- IHS Mccloskey Coal Group - USA
- Thiess Contractors Indonesia
- San Jose City I Power Corp, Philippines
- Vedanta Resources Plc - India
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Grasim Industreis Ltd - India
- Georgia Ports Authority, United States
- Cigading International Bulk Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- IEA Clean Coal Centre - UK
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- PNOC Exploration Corporation - Philippines
- Indonesian Coal Mining Association
- Anglo American - United Kingdom
- Videocon Industries ltd - India
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Price Waterhouse Coopers - Russia
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- Central Java Power - Indonesia
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- India Bulls Power Limited - India
- Formosa Plastics Group - Taiwan
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Eastern Coal Council - USA
- Ind-Barath Power Infra Limited - India
- Australian Coal Association
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
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