March 26th AKRR email summary

The news related to longer-term trends in export coal markets in the Pacific was a little light this last two weeks but still interesting in the details. I'll go out on a limb and say it continues to support a rather glum outlook on price and volume for Pacific seaborne coal for the foreseeable future. 

Indonesia

ASIA THERMAL COAL: Indonesian Panamax deal adds to pressure on Chinese spot prices - Platts --20Mar2013

Competitively-priced cargoes of Indonesian thermal coal added to the downward pressure on Chinese spot prices Wednesday, with a Panamax spot cargo of Kalimantan 5,500 kcal/kg NAR coal heard placed into south China at $83/mt CFR basis, market sources said.

Falls in domestic thermal coal prices and a bullish freight market have together made Chinese buyers more restrained in their purchasing behavior for seaborne-traded cargoes. "We don't like booking cargoes far ahead in the current market," said a source at a Shanxi-based trader.

Indonesia aims to produce 391 mil mt of coal in 2013, up 1% on year - Platts --18Mar2013

US

Govs. Inslee, Kitzhaber seek study on coal pollution before building export terminals

Gov. Jay Inslee and Oregon Gov. John Kitzhaber wrote a letter to the White House today asking for a study of the climate-change and air-pollution effects of coal leases on federal lands and export of that coal to Asia.

That could put a new obstacle in the way of a series of shipping terminals proposed for Bellingham, Longview and the Oregon coast intended to send coal to Asia. Environmental agencies are already looking into their potential effects, but the two governors want a study of the broader effects of coal burning.

Australia

Australian Newcastle port's coal exports hold steady on week at 2.39 mil mt - Platts --25Mar2013

Coal shipments from Newcastle port in eastern Australia were steady week on week Monday at 2.39 million mt loaded on to 29 ships as the authorities embarked on a round-the-clock dredging program to increase the depth of the shipping channel after a build-up of silt, said a spokeswoman for the Newcastle Port Corporation.

China

China Thermal Coal Supplies Rise to 32-Week High as Price Slides - Bloomberg

Power-station coal stockpiles at China’s largest port for the fuel rose to the highest level in 32 weeks as prices slid to a three-year low.

Utilities in China, the world’s biggest energy user, cut coal consumption as hydro power generation increased in the first two months, according to Helen Lau, a Hong Kong-based analyst at UOB-Kay Hian Ltd. Stockpiles also rose because the landed cost of imported coal is about 10 yuan to 20 yuan a ton cheaper than domestic supplies, she said. Coal at the Australian port of Newcastle, a benchmark grade for Asia, cost $89.15 a ton as of March 15, according to data from IHS McCloskey.

“Power plants are keen to restock inventories when domestic coal is still at a premium to imports, leading to high inventories,” Lau said. Chinese prices are “close to a bottom” as the country’s power demand is set to pick up in the second quarter, she said.

Panamax coal freight rates rise as grain season provides ample support - Platts --22Mar2013

 

On China's Electricity Grid, East Needs West—for Coal - Bloomberg/ Businessweek

Nice little summary of the large scale high-voltage transmission project. Most experts think the lack of water makes this unfeasible; and the NDRC wonks think it is a bad idea. But still, it's nice to see that someone wrote an article about this series of massive potential projects.

Unrelated but interesting:

Fredriksen Bets $2.6 Billion New Ships Will Beat Glut: Freight -Bloomberg

I can't decide if this is clever or stupid - and I wonder how much he has sitting idle in Cypriot banks:

John Fredriksen, the richest shipping investor, is spending $2.6 billion on the biggest fleet of fuel-efficient ships in history, betting that record energy costs and a global capacity glut won’t ease any time soon.

India not quite the shining knight for coal miners: Clyde Russell - Reuters

What's a desperate coal exec to do about his stock price with articles like this:

Rising Indian coal imports are the knight in shining armour for producers from the Americas through Africa to Asia -- at least that's the impression the industry is keen to give.

China to start trading coking coal futures on March 22 -Exchange - Reuters

Yes, this is for coking coal; but maybe forward markets will develop for steam coa

Post with data about Daqin RR
标题：大秦铁路投资逻辑：受益铁路改革 中线能涨40%
顶楼   2013-03-22 18:40:00 作者：wujiang124635
难得今天有时间看了半天大秦铁路，由于没有时间去一篇篇翻过往年报，所以在网上搜了一大堆研究报告看了下，给大家说说自己的体会。首先说下结论，大秦铁路现价不高，可以长期持有，而且我把自己的中国中铁卖掉换了大秦铁路。
 
先

On China's Electricity Grid, East Needs West—for Coal
Businessweek / Bloomberg
By Christina Larson on March 21, 2013
Overview of East West electricity transmission (cites China Signpost on Xinjiang coal development, as well as Ailung Yang of WRI and Jennifer Wilson at China Environment Forum in DC (Woodrow Wilson Ctr))

China Thermal Coal Supplies Rise to 32-Week High as Price Slides
Bloomberg
Sarah Chen

Power-station coal stockpiles at China’s largest port for the fuel rose to the highest level in 32 weeks as prices slid to a three-year low. . . 

Utilities in China, the world’s biggest energy user, cut coal consumption as hydro power generation increased in the first two months, according to Helen Lau, a Hong Kong-based analyst at UOB-Kay Hian Ltd. Stockpiles also rose because the landed cost of imported coal is about 10 yuan to 20 yuan a ton cheaper than domestic supplies, she said. Coal at the Australian port of Newcastle, a benchmark grade for Asia, cost $89.15 a ton as of March 15, according to data from IHS McCloskey. . . 

“Power plants are keen to restock inventories when domestic coal is still at a premium to imports, leading to high inventories,” Lau said. Chinese prices are “close to a bottom” as the country’s power demand is set to pick up in the second quarter, she said.

Thermal coal market slack amid supply-demand imbalance: SocGen
London (Platts)--21Mar2013/1232 pm EDT/1632 GMT

The seaborne thermal coal market is likely to remain slack as increasing global export capacity over 2013-14 slightly outpaces demand growth, according to a report by Societe Generale Thursday.

The French investment bank revised down its European CIF ARA year-ahead (Cal-14) price forecast by 4% to $99.40/mt in 2013.
...
SocGen said that expected reductions in excess coal supply over the next six quarters would ultimately provide a floor around the $90-95/mt level for CIF ARA calendar year products.

The bank said that "significant changes in prices will only come via material changes in supply and demand balance -- and for the next year we see neither side changing materially."

--Gareth Carpenter, gareth_carpenter@platts.com --Edited by James Leech, james_leech@platts.com

Indonesia Low-Grade Coal Prices Seen Falling on China Supply

Jakarta Globe
March 15, 2013

The price for low-grade power-station coal in Indonesia, the world’s biggest exporter of the fuel, fell last week as Chinese stockpiles rose, according to a Bloomberg News survey.    
Indonesian coal with a calorific value of 4,000 kilocalories a kilogram and 0.5 percent sulfur averaged $39.62 a metric ton in the week ended March 8, down from $42.93 a ton a week earlier, according to the median forecast of three traders in the survey.     

应适时调整和改变煤炭进口政策
Alibaba
Calling for new standards and limits on coal imports


India not quite the shining knight for coal miners: Clyde Russell

Reuters

Rising Indian coal imports are the knight in shining armour for producers from the Americas through Africa to Asia -- at least that's the impression the industry is keen to give.
That India's coal imports have no option but to rise and the only matter in dispute is by how much, was the consensus of producers and consumers at the Coaltrans India conference this week in Goa.

News from the last two weeks that is relevant to the development of the seaborne market for thermal coal in the Pacific:

USA (Long-Term Supply)

The Coos Bay port project, one of the five proposed coal port expansions in the Pacific Northwest, looks like it will stall because Mitsui and Korean Electric Power have backed out.

South Korea (Demand)
Several South Korean power companies are facing delays in the delivery of Indonesian thermal coal because several miners have deferred shipments from the first quarter to the second due to incessant rain, industry sources said.

China (Demand)

Short-term: 

Platts reports that inventories are rising, prices are falling and that traders are scouting for bargains on thermal coal. 

Long-term:

Political developments that related to long-term prospects for Pacific seaborne coal trade included changes in how the government is responding to public anxiety about pollution (including discussion of limiting low calorie thermal coal imports), and the break-up of the the Rail Ministry, which is expected to lead to more rapid development of freight rail infrastructure. Both developments are part of long-term trends that weaken the generic case for investing in export coal facilities on the Pacific. Deutsche Bank forecasts 18% decrease in coal import volumes if China tightens air regulations and mentions the possibility of China becoming a coal exporter again.

Indonesia (Supply) - Indonesia to halt export of low and mid calorific value coal. I have seen this several places but no mainstream outlets; it doesn't jibe with this Bloomberg article from 6 weeks ago saying that Indonesia would NOT restrict exports of low-calorie coal.

Mongolia (Long-Term Supply) - Major revision of Mongolian mining regulations is underway. The economic downturn, fear of domination by China, and continuous political meddling in previously signed mining contracts has slowed the development of Mongolia's coal and copper reserves. Regulatory changes could remove some of the obstacles that have been erected by politicians in the past few years (e.g., ownership/control requirements) and lead to the more rapid development of the country's resources. 

Botswana (Long-Term Supply) - The Chamber of Mines said they can export 115-million tons of thermal coal in the next seven years. They want a private partner to build 1,500km railroad to Namibian port at Walvis Bay. Not sure how likely this is, but it is relevant to the Pacific because it is indicative of the African supply that could become available to India (instead of supply from Indonesia).

China Coal Price Falls to Three-Year Low as Inventories Rise
Bloomberg News - Mar 10, 2013 9:53 PM GMT-0800

The benchmark price for China’s power-station coal fell to the lowest in more than three years as increased imports of the fuel boosted stockpiles amid a slowdown in power generation.

Spot coal with an energy value of 5,500 kilocalories per kilogram at the port of Qinhuangdao was at a range of 615 yuan ($98.85) to 625 yuan a metric ton as of yesterday, down 5 yuan from the week before, according to data today from the China Coal Transport and Distribution Association. That’s the lowest price since Oct. 19, 2009, according to data compiled by Bloomberg. Stockpiles of the fuel at the port rose 3.6 percent to 7.45 million tons, the highest in a month.

Deputy appeals for greener coal mining policies
China Daily
Wei Tian

A legislator has called for more policies to encourage greener exploration of coal in an attempt to improve energy efficiency and reduce pollution.

"Society is now striving to stop extravagance on the dinner table, but what should draw more attention is energy waste," said Bu Changsen, chairman of Shandong Energy Group, the country's second-largest coal producer.

The Coal Monster: Pollution Forces Chinese Leaders to Act
Der Spiegel
Bernhard Zand


No political event or corruption scandal of the recent past has generated as much public attention as this winter's environmental crisis. Chinese bloggers are on a rampage, and even the most loyal government newspapers are examining every aspect of the crisis and attacking those responsible for conditions in China with unprecedented ferocity. The fury over toxic air, food and drinking water marks a political turning point.

限制劣质煤炭进口 减少大气污染物排放
Limit Low Quality Coal Imports, Decrease Air Pollution


Hua Wei the chairman of Shanxi Coal & Chemical Industry Group (3rd largest coal company in China) says China should limit imports of low calorie coal and restrict exports of cleaner, higher grade coals.

新华社北京3月9日电（记者许祖华 江国成）近年来，全球极端气候频发。尤其是今年以来，我国出现了大范围、长时间的雾霾天气，给我们的环境问题敲响了警钟。对此，全国人大代表、陕西煤业化工集团有限责任公司董事长华炜建议，应提高化石能源清洁利用，减少大气污染物排放。

　　华炜建议，我国应限制劣质煤炭进口。去年我国进口煤炭达2.9亿吨，其中大部分是热值不高的动力煤。出口煤炭926万吨，基本是经过洗选的精煤。进口劣质煤炭就等于进口了排放和污染，出口洗精煤就等于把煤泥矸石等污染物留给了自己。因此，建议提高进口煤的质量门槛，禁止进口未经洗选的低热值原煤。

　　同时，限制国内劣质煤生产。有序关停和淘汰我国中东部低热值、高硫分、高灰分煤炭生产。加大中西部地区优质煤炭基地开发，提高煤炭洗选比例。
　　作者：许祖华 江国成

Major Revision of Mongolian Mining Regulations Is Underway
Eurasia Daily Monitor Volume: 10 Issue
Mendee Jargalsaikhany

The first public debate on the proposed revisions of Mongolia’s mining regulations was conducted at the Citizen’s Hall of the Mongolian government on January 18, 2013. Although the revisions are long overdue, legislators appear to be in agreement that more deliberations are necessary in order to reflect the concerns and suggestions of miners, investors and the public prior to submitting the final bill to the parliament. As stressed by Tsagaan Puntsag, the head of the presidential office, lawmakers avoided politicizing the revisions, opting instead to push for a more comprehensive, long term regulatory framework (Minutes of Debate, Citizen’s Hall of Mongolia, www.irgen.org). 

Fu Chengyu (Sinopec chairman) blames coal not fuel quality for increase in pollution

傅成玉回应“油质不过关”:污染罪魁祸首是煤炭
xinhuanet

“现在大家都骂雾霾是因为我们油质不过关所致，我们也很无奈。”全国政协委员、中石化董事长傅成玉表示，其实中国的标准和欧美国家的标准是一致的，国四、国五也等同于欧四、欧五，只是目前汽油从国三上升到国五，能源消耗要增加44%，没有产生实际效益，很多城市都不愿执行，执行标准不到位。

中石化董事长傅成玉：光在油品上较真儿不全面
http://finance.huanqiu.com

3月5日，全国政协委员、中石化董事长傅成玉在小组讨论政府工作报告时坦言，当前无论是国家经济，还是企业自身，发展都遇上了绕不开的环境问题和能源安全问题。

China's new leadership faces growing environmental pressures
Guardian
Selective quotes

Leaders say 'ecological progress' is a priority, but air pollution and greenhouse gas emissions from coal remain a problem
We’re not going to see any big change in 2013, because it is in the middle of China’s 12th five-year plan,” said Melanie Hart, a policy analyst for the Center for American Progress. Still, “the 2011 to 2015 plan is dedicated to move in a low carbon direction,” she said.

...“It (coal consumption) will still continue to grow and grow exponentially,” said Julio Friedmann, energy technology chief at Lawrence Livermore National Laboratory in the United States, and technical program manager for the US-China Clean Energy Research Center for Advanced Coal Technology.
Friedmann said he expects a 50 to 60 percent increase in China’s coal consumption in coming years. That’s not as large as some experts had predicted, but even so, “I do not see a plateau in the coming years,” he said.

China Signals Reform of Rail System
WSJ

BEIJING—China signaled it is on the verge of shaking up its massive railway system, long plagued by corruption allegations and heavy debt and since a deadly 2011 train crash also under a cloud of safety concerns.

Reform of China's Railways Ministry will start once a plan to merge it with China's Transport Ministry is approved, said Vice Railway Minister Hu Yadong on the sidelines of China's once-a-year legislative session.

ASIA THERMAL COAL: Chinese buyers scout for bargains for imported coal
Singapore (Platts)--5Mar2013/547 am EST/1047 GMT

Chinese buyers remained on the sidelines as they continued to scout for thermal coal cargoes at cheaper prices with no rush to conclude deals amid huge stockpiles at ports and power companies, sources said.

Despite the lack of demand, some Indonesian miners have raised their offer prices since last week as supply gets cramped due to rains in East Kalimantan and the crackdown on illegal mining in South Kalimantan, sources said.

A Singapore-based trader said that cargoes of 4,200 kcal/kg GAR coal were being offered as high as $44-45/mt FOB this week, up nearly $3-4 since Friday.

"There is not much movement [of imported coal] to China because of the [higher] prices. [Buyers are] talking prices even lower than what were before the Lunar New Year," he added.

Hu Shuli on what the rail ministry re-org means:
铁路改革的信号意义


Rumors about the structure of new rail ministry
传铁道部将分拆为国家铁路总局和中国铁路总公司


China Clean-Air Policies Seen by Deutsche Cutting Coal Trade 18%
Bloomberg
Michelle Wiese Bockmann

Global shipments of thermal coal could be 18 percent lower than forecasted by 2015 should China, the biggest importer, toughen measures to curb air pollution to safe levels, Deutsche Bank AG said.

. . . The potential revisions to coal demand as a result of a higher resource tax and levies on carbon and other emissions would likely reduce coal import demand markedly, and possibly even return China to the status of net exporter, which last occurred in 2008,” according to the report. 

Colombia Lifts Port Ban on Drummond Coal Shipments

Colombia's government has ended a nearly monthlong ban on coal shipments by the U.S. -based Drummond Co. that was imposed after it dumped tons of coal into the ocean at a Caribbean port.
....Drummond produces 24 million metric tons of coal in Colombia from an open pit mine near the Caribbean and moves the coal by train to a port near Santa Marta. It is the South American country's No. 2 producer of coal, accounting for nearly a quarter of output.

Colombia top coal mine reaches accord that may end strike

A union representing workers at Colombia’s biggest coal mine said it reached a preliminary wage accord that may end a monthlong strike at the complex owned by Xstrata Plc, BHP Billiton Limited and Anglo American Plc.

S Korea copes with Q1 delays in Indonesian coal delivery, confident on Q2
PLATTS

Several South Korean power companies are facing delays in the delivery of Indonesian thermal coal because several miners have deferred shipments from the first quarter to the second due to incessant rain, industry sources said.

However, South Korean market participants said they were hopeful that this issue could be resolved by mid-March.

Heavy rain on the coal-producing Indonesian islands of Kalimantan and Sumatra have led to delays in shipping cargoes of lower calorific value coal by small- and medium-sized producers, industry sources said. Platts has so far confirmed Q1 delivery delays of at least six Panamax shipments of Indonesian coal with heating values of 4,600-4,800 kcal/kg NAR.

However, one South Korean power utility source said contract overbooking by shippers also contributed to the delays.

Greenpeace Report: The Myth of China's Endless Coal Demand: A missing market for US Exports
Nice fairly objective summary of all the reasons not to be optimistic about coal exports. I think they overestimate the ability of the government to curb consumption of coal and the ability to substitute in renewable on a large enough scale. But still a good summary of all the things that point to moderating increases in demand for coal

A new report identifies several factors that cast doubt on the future of Chinese demand for US coal, including new national and local policies in China aimed at reducing air pollution and capping coal use, slowing economic growth, surging renewable energy growth, and increased public concern about air pollution

1. A DESPERATE INDUSTRY—NOT SOUND ECONOMICS—
IS DRIVING US COAL EXPORT PROPOSALS
2. CHINA PRODUCES NEARLY ALL Of THE COAL IT CONSUMES
3. CHINA’S ECONOMIC GROWTH IS SLOWING
4. COAL USE IN CHINA IS FLATTENING OUT
5. CHINESE POLICY CAPS ON COAL PRODUCTION AND
CONSUMPTION WILL DECOUPLE ECONOMIC GROWTH FROM COAL
6. RENEWABLE ENERGY IS ON THE RISE
7. CHINESE SOCIETY IS RESISTING COAL AND bECOMING MORE
AWARE Of ITS IMPACTS ON HEALTH AND WATER
8. UNSTABLE ASIAN DEMAND HAS SUNK US COAL EXPORT
PROPOSALS IN THE PAST
9. INTERNATIONAL COMPETITORS RECOGNIZE FLAGGING CHINESE
DEMAND

China's Ministry of Railways to be merged into Transport Ministry
International Railway Journal
The first ministry-level reform in five years

CHINA's Ministry of Railways (MOR) and the country's transport ministry are set to be merged, under plans reportedly agreed this week by the country's new leaders

China’s rail ministry faces break-up

FT
Simon Rabinovitch in Beijing
Should make investment in the industry easier.

Marred by corruption and weighed down by debt, China’s railway ministry is expected to be eliminated in a shake-up that would mark the first governance reforms by the country’s new leadership.

The railway ministry has long functioned as a state within a state in China, with its own police, courts and some 2.1m employees. By taking on such a powerful entity, Xi Jinping, the incoming president, would be displaying a willingness to push through changes to the country’s system of government that are needed to sustain rapid economic growth.

The restructuring, which local media say was discussed at a Communist party assembly that ended on Thursday, is likely to fall short of reformers’ hopes for consolidation of the bodies that oversee financial and energy affairs.

Nevertheless, rolling the railway ministry into the transport ministry, a change previous leaders discussed but failed to implement, will mark the first major change to the Chinese bureaucracy in five years.