Monday, April 08, 2013
Sinopec Group, China's second largest energy company is to invest up to $11.3 billion (70 billion yuan) to build the country's largest coal-to-gas project in 8-10 years to meet a rising demand for natural gas.
The project will be developed in China's northwestern region of Xinjiang and will have annual production capacity of 8 billion cubic metres of gas.
Coal extracted from two mines in Zhundong will be used to feed coal-to-gas production facilities nearby. The coal mines have annual production capacity of 15 million tonnes each.
The natural gas produced will be transmitted through Sinopec Group's 30 bcm/year pipeline stretching from Xinjiang to Guangdong province in south China to Zhejiang province in east China.
Indonesia low-grade coal prices seen falling on China supply
Borneo Post March 16, 2013, Saturday
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, Jakarta Globe reported news.
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.
Caterpillar cuts highlight mining woes
By Neil Munshi in Chicago
Heavy industry is known for its toughness but one of its biggest players is taking a battering.
Caterpillar, the world’s largest maker of earthmoving equipment, has announced plans to cut about 2,000 jobs in recent weeks, in a further sign of how weakness in the global mining industry and low commodity prices are hurting heavy industry.
The mining industry is being hit on two fronts. The US shale gas boom has driven down natural gas prices, which has caused many power producers to switch from coal to natural gas, while the industrial slowdown in China has also slowed demand for resources in the world’s largest consumer of mined commodities.
These twin effects have hit Caterpillar in the US and beyond. The company last week announced 460 job cuts at its plant in Decatur, Illinois, near its headquarters, citing weakness in the mining sector. The company had announced lay-offs and instituted a shortened working week last year.
The move comes a week after reports that the company will cut up to 300 jobs at a facility in South Milwaukee, which it acquired when it bought mining equipment manufacturer Bucyrus in 2011. In late February, the company announced it would cut 1,400 jobs in Belgium, citing rising costs and the troubling state of the European economy, which has seen weakness in both its core construction and mining sectors.
Caterpillar’s rivals are also feeling the pinch. Joy Global, a Milwaukee-based mining equipment services group, reported a roughly 30 per cent drop in orders in the quarter ended January 25, to $1bn, compared with a year earlier. In the previous two quarters, Joy orders dropped 5 per cent and 25 per cent, respectively, year on year.
Last October, Joy announced it would cut up to 250 jobs in response to slowing business.
Coal producers, and the companies that supply mining equipment, including Caterpillar, have suffered amid a boom in US natural gas. The price of US natural gas reached an 18-month high on Friday, at $4.124 per million British thermal units.
But a surge in output in recent years has driven prices as low as $2 per Mbtu last year, causing demand to spike among petrochemical plants and industries configured to take advantage of the boom.
The effect on US coal producers has been severe: coal production and coal power generation fell by a tenth in 2012.
The economic slowdown in China saw growth fall to 7.8 per cent last year, the lowest in more than a decade, driving down to single-digits demand for commodities such as iron ore, copper and coal.
Demand growth remains anaemic, which has kept global prices for commodities below their post-financial crisis peak in 2011, according to data from the International Monetary Fund. China, the world’s largest steel producer, also saw steel inventories reach record levels in February, suggesting buying remains constrained.
The effect on US coal producers has been severe: coal production and coal power fell by a tenth in 2012
Still, Caterpillar is optimistic about the market, which it has said will see GDP growth near 8.5 per cent this year, driving up commodity prices and demand. Increased Chinese demand would help boost Caterpillar sales in Australia and South America, among other places that supply China with natural resources.
But last year’s weakness in commodity prices saw the metals and mining industry suffer, with fundraising dropping 25 per cent to $249bn, compared with $340bn the year prior.
“The two major mining equipment manufacturers, Caterpillar and Joy Global, are driven largely by miners’ . . . orders for new equipment,” said Adam Fleck, analyst at Morningstar. Weakness in the mining industry is “leading to pretty large year-on-year reductions in orders”, he said.
In each of the past two quarters, Caterpillar reported that new orders had “significantly declined” or were “well below” those during the same periods the year before.
In January, when the company reported record full-year earnings, Douglas Oberhelman, chief executive, said he was pleased that the company had reduced its inventory by $2bn in the fourth quarter, while its dealers had also reduced their inventories and order rates.
Analysts applaud the reduction in inventories as a cost-saving measure amid lean times, but Caterpillar and its rivals will be hoping for a pick-up in demand so they do not find themselves in a hole too deep to dig themselves out of.