Indonesia drops plan to lift coal prices by restricting exports

Indonesia is abandoning a proposal to boost the lowest coal prices since 2010 by banning exports of lower quality grades. 

The world’s largest exporter of thermal coal had drafted a decree to prohibit overseas sales starting in 2014 of coal with a heating value of less than 5,700 kilocalories a kilogram on an air dried basis according to a copy of the proposal on the ministry’s website. Miners would have been forced to upgrade the heating value of the fuel if they wanted to ship it.

He said that “About 93% of the country’s coal reserves an estimated 28 billion tonne in 2011 are below top quality.”

Source - Bloomberg

Coal stocks held by 6 major China power generators down 6% on week
Huaihua, Hunan (Platts)

Combined coal stocks held by six major power generation companies, based in eastern and southern China, averaged 14.269 million mt/d in the week ended Tuesday, down 6% from the previous week, Qinhuangdao Port said in a weekly report on Thursday.
The stocks held by the six utilities -- Zhejiang Power, Shanghai Power, Guangdong Power (Yudean), Guodian, Datang and Huaneng -- will be able to last for an average 20.8 days of consumption, up 0.3 days week on week, according to the report.

--Reggie Le, newsdesk@platts.com
--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

Surplus supply keeps coal price in a low ebb

China Daily!

The price of coal is likely to remain bearish this year because of surplus production and the probable further decline of power production, the former head of the National Energy Administration said on Saturday.
China's industrial production, including in energy sectors, has had a sufficient supply of coal and power in recent years, and 2013 will be similar, said Zhang Guobao, the former director of the administration.

weitian@chinadaily.com.cn

Mongolia to Cancel China Coal-Supply Contract, Delay IPO

WSJ

Mostly about coking coal

Mongolia's government is planning to cancel a $250 million coal-supply deal with Aluminum Corp. of China Ltd. that it deems to be undervalued, a move that may deepen distrust between the Mongolia and its neighbor.
Meanwhile, the government is deferring an oft-postponed initial public offering for its state-owned Tavan Tolgoi coal project, a Mongolian government official said Thursday.

...Mongolia, which has huge and as yet lightly exploited mineral reserves, has been a prime beneficiary of a mining boom in recent years, but resource nationalism and a decline in the commodities market have thrown its future into uncertainty.

...Erdenes-Tavan Tolgoi has been seeking to raise as much as $3 billion via a public share offering that has been repeatedly delayed.
The IPO likely won't proceed this year, according to the most recent plan, the official said. Erdenes-Tavan Tolgoi officials couldn't be reached for comment.

Write to Chuin-Wei Yap at chuin-wei.yap@dowjones.com

China's coal imports in 2012 rise 58% on year to 289 million mt
Platt's 2012 YE numbers for China

China imported 289 million mt of coal in 2012, up 57.9% year on year, a compilation of the monthly China customs data released on Tuesday showed.

Of the total imports, thermal coal comprised 35.14%, coking coal 18.55%, anthracite 11.93%, lignite 18.59% and the rest was classified as "others," the compilation showed.

For the month of December 2012, China imported 12.98 million mt of thermal coal, up 62.25% from the 8 million mt imported in December 2011, data showed.

Most of the coal imported came from Indonesia (33.05%). Next was Australia (38.18%), South Africa (12.4%), Russia (6.58%), Mongolia (2.1%), Canada (0.92%), Colombia (2.45%), the US (4.24%) and others (0.08%).

Lignite imports last year mainly originated from Indonesia (93.27%), the Philippines (4.9%) and others (1.83%).
Chinese coal imports with a calorific value of 4,000 kcal/kg NAR are considered lignite, an industry source said.

--Cecilia Quiambao, Cecilia_quiambao@platts.com
--Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

After The Gold Rush: A Perspective on Future U.S. Natural Gas Supply and Price
Pouring cold water on shale gas enthusiasm . . . this is a year old

Central and Southwest China: The Key Battleground for Shale Gas and New Low-Cost Coal Supplies from Xinjiang, Mongolia, and Wyoming 
Pouring cold water on shale gas enthusiasm (China mix). From China SignPost. 

Also this a reminder that Xinjiang has massive potential for surface mining of thermal coal -- it is like the Powder River Basin X 2. And don't forget Mongolia!

2013年电煤合同量创七年新高


今年铁路基建投资将超6000亿


煤炭进口激增 是喜是忧？

Siberian coal miner sees advantage in distance

Reuters reported that coal miner Kolmar, controlled by the billionaire founder of trader Mr Gunvor will plow money into its east Siberian coal fields to capture the Asian steel making market ahead of its Russian rivals farther west.

China Clean-Air Bid Faces Resistance WSJ

Neptune Terminals plans to double coal export Coal Guru Canada supply

Coal Train: The people and process behind Bellingham's coal port decision

Tom Albanese: another mining chief bites the dust as sector negotiates different era
UAF graduate, Tom Albanese, kicked out at Rio Tinto for $14 BN in writedowns (this year). Also leaving are the CFO and the head of Strategery. The owners were begging for mercy after two acquisitions for $40BN that are now worth $10BN - - - and incompetent due diligence in Mozambique. It turns out the coal was somewhere else and they couldn't transport it out when it came time to actually do some bidness - in 18 months the value dropped from $3BN to $1BN. Since Rio is not an American company Albanese will walk away with egg on his face and a measly few million in severance instead of the standard $50 million + package to be earned by wasting billions at an American company.

RIP Seaborne Coal

Blog

Nemo: HK - based macro trader who deals trades in commodities

So assuming China “rebalances” and doesn’t continue with 45% of GDP coming from investment directed into heavy industry that is power intensive like aluminum, the party is definitely over for the coal sector. At the very best its no growth for companies that export coal to China. The problem is that even that outcome is too bullish by a significant margin because China is producing vastly more coal domestically and is rapidly building out the rail infrastructure to move it from mines in Inner Mongolia and Shanxi to coastal areas. Bernstein in particular has been pretty clued into this and it isn’t hard to see why China would do this: Mongolian met coal prices are roughly half of the seaborne market as per this dispute about the Erdenes TT mine shows. Thermal coal prices out of Mongolia are similarly cheap and as a landlocked country Mongolia does not have a lot of pricing power. So when you do the coal market balance you seaborne imports dropping off fairly quickly from 2H 2013 onwards and that is assuming China grows at around 7.5% pa.

He doesn't mention the thermal coal reserves in Xinjiang, but all the more reason to think his onto something . . .

More China Demand Won't Stoke U.S. Coal

BARRONS

Credit Suisse says increased supply from Australia will cap price upside (this is referring to MET COAL).

However we do think it is worth noting that in this month's channel checks, our China Metals and Mining team has seen some signs for a thermal-coal price recovery in the coming months, driven by lower inventories and improving demand. We believe if we do see an uptick in global thermal-coal prices (API2 [delivered price to northwest Europe] currently sub $90 per metric ton), this could lead to improved sentiment for the group, with Peabody the most direct play.

Record China imports unlikely to excite coal market

Reuters

Clyde Russell: Clyde Russell is a Reuters market analyst.

The real difference between coal and iron ore is the outlook for supply, with iron ore still potentially slightly constrained, especially if Indian exports remain depressed due to a crackdown on illegal mining and rising domestic consumption.
Coal supply stands to exceed demand for a second year in 2013, with Barclays estimating an additional 32 million tonnes will be available this year.
However, if China's appetite for imported coal grows at the same rate in 2013 as it did last year, this implies an additional 65 million tonnes.
Even a slackening to half of 2012's pace would still see China absorb the entire available additional coal.
...
It's also probably the case that China's appetite for imports is because prices are low, making imported coal competitive with domestic supplies.

Coal and electricity firms sign coal deals

Beijing Business Today reported that China's coal and electricity companies signed deals for a total of 1.87 billion metric tonnes of coal for 2013, an increase of 55.8% YoY.
Analysts said the surge is due to the liberalization of the coal and electricity prices. Uncertain about the future price of coal, electricity companies are willing to purchase more coal. Coal producers are also willing to sell more coal as they are faced with rising stocks of the commodity.
In December, China's State Council decided to liberalize the prices of coal supplied to power plants in 2013.
Most power generated in China comes from coal-fired plants, which makes power producers heavily exposed to the prices of the commodity. In order to keep electricity tariffs stable, the government has asked coal suppliers for years to sell to power firms at contracted prices, which are far below market rates.

Source - Beijing Business Today

Dry bulk panamax market heavily oversupplied and unlikely to find support in 2013

Despite positive indication for a significant surge of dry bulk demand this year, the oversupply problems of the market, will continue to weigh heavily in terms of freight rates.
The BDI was up by 9 points to 743, with Panamaxes posting an increase of 35 points to 717, which was enough to push the market higher, as all other subsectors were mostly unchanged.
According to a recent note from analysts Commodore Research & Consultancy, "Chinese demand for imported thermal coal has started the week at an extremely robust level and is poised to stay strong during the remainder of this week. 8 vessels were chartered to haul thermal coal cargoes to China on Monday. This was a huge amount for a single day's worth of chartering activity.
During times of moderate demand, an average of 3 vessels is normally chartered to haul thermal coal cargoes to China each day. Demand is poised to stay robust throughout this week and into next week due to low Chinese coal port stockpiles and intensifying winter electricity demand. Coal stockpiles at Qinhuangdao have fallen to 6.1 million tonne. This is well below the crucial 7mt level that official strive to maintain at all Coal stockpiles at Qinhuangdao times.
According to Commodore, panamax rates aren't expected to find significant support in the near term.
It concludes that "We continue to anticipate that new building deliveries will be very high this month. Dry bulk fleet growth traditionally surges every January, as owners normally delay a large amount of December deliveries to be delivered one month later in January. Delaying December deliveries allow owners to receive vessels that will be viewed as being a year younger.”

Source - www.hellenicshippingnews.com


China's coal imports hit record high

China's coal imports jumped to a record of nearly 30 million tonnes in December, driving full-year imports to a high of over 230 million tonnes, as buyers flocked to cheap overseas supplies as they restock. Shipments surged to 29.0 million tonnes in December, up 36.6 percent from year ago and marking the third consecutive monthly rise as traders boosted steam coal supplies over the winter and as steel mills with low inventory stepped up coking coal purchases on a brighter economic outlook.

Total coal imports for 2012 hit 234.3 million tonnes, jumping 28.7 percent from a year earlier, official customs data showed on Monday. Indonesia again took the top spot as the largest supplier to China in 2012. Shipments for the year from Russia and Colombia nearly doubled from 2011, while imports from the United States, Canada and Australia all jumped over 80 percent.
"Weaker regional prices in early November has seen the arbitrage for imported coal re-emerge, so that brought more Chinese traders to the market," said a Shanghai-based coal trader. "The jump in coking coal imports was also helped by restocking activities by steel mills. Considering the fall in coal stocks at utilities and harsh weather in December, imports will likely stay robust in January."

Combined coal stocks held by China's six power generation companies in eastern and southern China stood at 14.65 million tonnes in the week to January 17th. The stocks represent around 20.5 days of consumption, compared to an average 22 days in late December.

The harshest winter in three decades has boosted thermal coal consumption, with the utilities having consumed a combined 5.012 million tonnes of coal last week, up 2.0 percent from the preceding week. Coking coal imports stood at 7.58 million tonnes in December, up 51.4 percent year on year and bringing full year imports to 53.6 million tonnes. Total exports for the year fell nearly a quarter from year ago to 14.7 million tonnes.

China to Boost Coal-Rail Capacity After Delays, Bernstein Says

Bloomberg News on January 15, 2013
Sarah Chen in Beijing at schen514@bloomberg.net

China will add 18 percent more coal- transporting rail capacity this year than initially forecast, piling downward pressure on the price of the fuel, according to Sanford C. Bernstein & Co.

The world’s top producer and consumer of coal will commission 2,950 kilometers (1,833 miles) of such rail lines after startup delays in 2012, caused by funding pullback following a fatal high-speed train crash in 2011, Bernstein said in an e-mailed note today. The broker had forecast 2,498 kilometers, according to the report.

Benchmark spot prices in China fell 20 percent last year as an economic slowdown damped demand for the power-station fuel, according to data from China Coal Transport and Distribution Association. Costs will decline 7 percent this year and continue to slide through 2015, Bernstein said in a report Jan. 14

“As delayed projects are commissioned in 2013, paths to market will expand and pressure on coal price will persist,” Michael Parker, a Hong Kong-based analyst at Bernstein, said in the report. “Rail capacity growth is a core aspect of our bearishness on the Chinese coal sector.”

The next track to be commissioned is a 98-kilometer link from north Chongqing to Fuling, expected to start operations in June, Bernstein said. Another 8,016 kilometers of railway will come online over the following 18 months, with new lines opening once every two to three months, it said.

Coal-dedicated lines commissioned last year totaled 179 kilometers, down 88 percent from 2011, according to Bernstein.

Seven major rail projects that link to ports in the northeastern Bohai Bay will be completed by 2015, with the Handan-Huanghua line to be finished this year, Bernstein said.

China’s power demand rose 5.5 percent to 4.96 trillion kilowatt-hours in 2012, after an 11.7 percent increase in 2011, the National Energy Administration said on Jan. 14.

Reduce greenhouse gas by exporting coal? Yes, says Stanford economistMARK GOLDEN

Western U.S. coal companies looking to expand sales to China will likely succeed, according to Stanford University economist Frank Wolak. But, due to energy market dynamics in the United States, those coal exports are likely to reduce global emissions of greenhouse gases.

If Pacific Coast states construct sufficient coal export facilities, the United States is likely to sell heaps of coal to Asia in the years ahead, but that should cut – not raise – global emissions of greenhouse gases, according to Frank Wolak, professor of economics at Stanford University.

Beijing's 'Airpocalypse' Spurs Pollution Controls, Public Pressure

NPR

Louisa Lim

In China's capital, they're calling it the "airpocalypse," with air pollution that's literally off the charts. The air has been classified as hazardous to human health for a fifth consecutive day, at its worst hitting pollution levels 25 times that considered safe in the U.S. The entire city is blanketed in a thick grey smog that smells of coal and stings the eyes, leading to official warnings to stay inside.

ASIA THERMAL COAL: Term deals find favor with Chinese consumers
Platts
Reggie Le

Chinese end-users have switched to concluding term contract deals and lessened their spot buying with the approach of China's Lunar New Year festivities in mid-February, as spot prices for south China stayed rangebound in Thursday's trading session in Asia at $85/mt CFR basis 5,500 kcal/kg NAR, said market sources.

China Coal Imports to Fall With Domestic Prices, Bernstein Says

Bloomberg
Chua Baizhen

China will cut coal imports this year as the cost of domestic supplies declines, Sanford C. Bernstein & Co. said in a report.

Net purchases from overseas will drop 47 percent to 150 million metric tons this year from 281 million in 2012, Bernstein said in the e-mailed note today. Average domestic benchmark prices will fall 7 percent, it said.

China, the world’s largest consumer and producer of coal, is undergoing a structural slowdown in power-consumption growth just as the capacity for production and transport of coal increases, according to Bernstein. Domestic prices will slide through 2015, while still being susceptible to “seasonal bumps,” Bernstein said.

“We believe that Chinese coal imports are likely to fall in absolute terms in 2013 as lower-priced domestic supply pushes out imports,” Michael Parker, a Hong Kong-based analyst at Bernstein, said in the report. “Over that entire time, we expect coal prices to trend downward. There is plenty of supply available both domestically and from the seaborne market if coal prices creep back up.”

US senators seek probe into royalties on coal exports

Reuters

Patrick Rucker

Two influential U.S. senators have asked the Interior Department to examine whether coal companies are dodging hundreds of millions of dollars in royalty payments on lucrative sales to Asia, citing a Reuters investigation into the matter.
The lawmakers who lead the Senate Energy and Natural Resources Committee want officials to find out whether miners are short-changing taxpayers when they tap the coal-rich Powder River Basin in eastern Montana and Wyoming.
The basin is mainly federal land and so taxpayers are due a share of those sales.

Two Economist articles on Coal this past weekend:

Coal in the rich world: The mixed fortunes of a fuel

Europe’s dirty secret: The unwelcome renaissance
Interesting explanation of how German policy favoring renewable sources of electricity caused power producers to substitute away from gas into coal.


China Lifts Coal Controls
RFA
Michael Lelyveld
2013-01-07

End of price cap is portrayed as a major reform.
Kevin J. Tu quote:

"I personally don't consider this is a very significant development, because in the past the government has already shown signs of deregulating the coal market," said Kevin J. Tu, director of the China energy and climate program at the Carnegie Endowment for International Peace.

About how power producers responding to market prices below contract prices in 2012: 

When market prices of coal plunged by over 20 percent, power companies found themselves locked into contracts at higher costs.
Many started defaulting on the contracts last July, Reuters reported. Some turned instead to cheaper imported coal, according to the industry website coalguru.com.

More from Kevin Tu:

But as long as power rates stay fixed, the government will be tempted to intervene in the market if costs start to climb again, Kevin Tu said.
"What will happen if the price of coal increases too much in the future?" he asked. "In that case, I believe the government will find it impossible to further deregulate the energy market. Eventually, they need to deregulate the electricity market."

So far, the government has been skittish about testing free market pricing on electricity and fuel consumers for fear of social pressures if costs rise too far or too fast.

In 2011, China's five big state-owned electricity companies reported combined losses of 31.2 billion yuan ($4.9 billion) on thermal power generation because of fixed prices, state media reported.

The idea behind all this is that government will would rather anger the power companies than face the public if end-consumer prices were to go up too much:

"The government still has a very strong tendency to intervene in the market if anything too drastic happens," said Tu.
But for the time being, signs suggest that the only price risk may be on the downside.
On Dec. 26, Xinhua reported that five coal companies in northern Shanxi province had signed long-term supply contracts with power producers for 2013, but the prices were even lower than current spot market rates.

Combined coal stocks at China's key Bohai Sea ports inch up to 17.54 mil mt
Platts
Reggie Le, newsdesk@platts.com

Combined coal stocks at China's four major Bohai Sea ports stood at 17.54 million mt on Sunday, up 60,000 mt, or 0.3%, week on week, Qinhuangdao Port data released Monday showed.
Coal stocks at Qinhuangdao Port dropped 5.7% week on week to 6.11 million mt on Sunday while stocks at Jingtang Port edged up 0.3% to 3.72 million mt. Stocks at Caofeidian Port rose 3.4% to 4.27 million mt and stocks at Tianjin Port rose 8.7% to 3.43 million mt.
The number of vessels queuing at the four ports totaled 158 on Sunday, down from 180 a week earlier, but up from 125 on December 23, 147 on December 16, 131 on December 9, and 136 on December 2, the port said in the statement.
Meanwhile, coal stocks at Fangcheng Port in southern China's Guangxi Zhuang Autonomous Region -- a key import facility for coal from South Africa -- stood at 6.3 million mt on Sunday, up from 6.08 million mt a week earlier, according to a port source.

In light of a steady influx of overseas coal since mid-December, the port source expects coal stocks to rise further at Fangcheng Port, to about 6.5 million mt by the end of this week.

--Edited by Geetha Narayanasamy, geetha_narayanasamy@platts.com

Asian coal volumes may rise, price may not: 

Reuters
Clyde Russell

Coal producers supplying Asia are likely to have a busy year, but that increase in demand won't necessarily translate into much higher prices.
This means together India and China may have imported an additional 77 million tonnes, not too far off Barclays estimate of 82 million tonnes in extra supply.
Of course, these two nations aren't the only determinants of the overall coal market balance, but they are likely to be the key swing factors in 2013, especially as the situation in Europe, the second-largest coal importing region, remains steady.

About China . . .

The government will scrap a cap on spot thermal coal prices and no longer intervene in contracts between sellers and utilities, the National Development and Reform Commission said last month.
This likely means that utilities will lose access to supplies at preferential rates, but will benefit from shorter-term contracts that will be more flexible.
It also means that imported coal will be able to more freely compete with domestic supplies, which has the potential to boost imports as long as the prices are competitive.
The price of domestic coal was 634 yuan ($101.77) a tonne last week, according to data from sxcoal.com, and $114.93 a tonne, according to McCloskey's Quinhuangdao price CO-FOBQHG-CN.
The key to Asian coal demand in 2013 is likely to be just how far short India's domestic output is from the target, and how the deregulation of China's vast domestic market plays out.

Indonesian United Tractors targets 6 mil mt thermal coal output in 2013, up 9% on year
Platts