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