Tuesday, March 12, 2013


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: 

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).

LINKS TO ARTICLES:

US:
Coal Export Terminal Faces Setback On South Oregon CoastJeff Barnard, Associated PressMitsui, a large international trading firm, and the Korean Electric Power Corporation backed out of the Coos Bay project.


South Korea:

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.

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.
CHINA:
China Coal Price Falls to Three-Year Low as Inventories Rise (PLATTS)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.
ASIA THERMAL COAL: Chinese buyers scout for bargains for imported coal (PLATTS)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.
POLLUTION CRISIS:  Public concern over pollution of air, water and soil has coalesced to such an extent that the government will address it directly. Blaming anomalous weather patterns and lectures about the trade-off between economic development and pollution by officials and media had begun to appear ridiculous in comparison with requests for better information, safe food and clean air. Widespread anxiety over dangerous levels of pollution could provoke citizens to step beyond targeted local protests and grumbling about air quality to become a principle around which society can organize. The new more open discussions include criticism of government and industry failures. Direct blame has been laid on specific actions by industry, including foot-dragging on establishing new fuel standards by oil refiners and the importing low-grade coal by the power industry. Two of the largest coal companies in China have said that more must be done to improve air quality, including limiting the import of low-calorie coal and restricting the export of higher grade and washed coals. Links below.



Caixin / Hu Shuli (中文)
Influential Hu Shuli calls for this to be a turning point for dealing with environmental problems. She notes that many members of the legislature (session just ended) are putting forth proposals to deal with pollution. Despite this being a crisis and gaining lots of attention, she insists that it is going to be a long-term and difficult problem to solve requiring hard work and a consistent focus.


In China, public anger over secrecy on environment
Reuters / Sui-Lee Wee and Adam Jourdan
When China's environment ministry told attorney Dong Zhengwei he couldn't have access to two-year old data about soil pollution because it was a "state secret", it added to mounting public outrage over the worsening environment.


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.


China's new leadership faces growing environmental pressures
Guardian UK / Chelsea Diana

Der Spiegel /Bernhard Zand

Limit Low Quality Coal Imports, Decrease Air Pollution
Xinhua / Xu Zuhua & Jiang Guocheng
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.

China Daily / Wei Tian
Bu Changsen, member of China's congress and chairman of Shandong Energy Group, the country's second-largest coal producer, has called for more policies to encourage greener exploration of coal in an attempt to improve energy efficiency and reduce pollution. 

Xinhua / Fu Chengyu (中文)
Influential Sinopec chair accepts blame (kind of - imported oil is low quality, complainers live in cities so more affected by car exhaust) and then points the finger at the coal industry.


RAIL MINISTRY DISMANTLED:  The Rail Ministry, the most influential highest profile remnant of China's planned economy, has been a reform target for years. By merging the Rail Ministry's regulatory functions into the Transportation Ministry and combining its commercial rail activities into a separate business, the new leadership has finally dismantled the enormously powerful Ministry. The ministry was older than the PRC itself (started during the Qing dynasty), with roughly 2 million employees and $500 billion USD in debt (yes, that's $0.5 trillion USD). Scandals in the passenger business, including the 2011 high-speed rail crash in Wenzhou and numerous ticket scalping scandals during the New Year's travel season, opened the way for exposure of billions of dollars in self-dealing; the Ministry was weakenedto the point where the central government could finally take it apart. The growth of capacity in China's freight system has lagged that of the overall economy and of the demand for coal transport services. Prices for passengers and freight are expected to increase and this increase, combined with the change in industry structure, is expected to help attract private investment into the freight transport sector.  No Links.



International Railway Journal

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



FT / Simon Rabinovitch

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.



Other:
Eurasia Daily Monitor Volume: 10 Issue / Mendee Jargalsaikhany

Mining Weekly / Reuters
Landlocked Botswana, which has the second-biggest coal resource in the continent after South Africa, plans to export as much as 40-million tons of coal in three to four years, Charles Siwawa, chief executive of Botswana Chamber of Mines, said.