Wednesday, July 10, 2013

Top stories:

The Chinese govt may abandon the proposed ban on low-CV coal imports. Australia mines continue to reduce coal production. A clever study came out showing that 500 million residents of northern China have a decreased life expectancy of 5 years when compared to those in the southern part due to different patterns of coal consumption. That's 2.5 billion years.

CHINA
Sentence suspended for two years, but Liu will spend at least 10 years in jail as Xi Jinping's corruption crackdown bites

China's twice-revised proposal to ban some imports of lower calorific value thermal coal, predominantly from Indonesia, and some US higher-sulfur thermal coal, was close to being suspended as a pretext to being quietly dropped, according to market sources Thursday.
Reports began filtering through the Chinese coal market from traders Thursday that the government agency drafting the imports ban, the National Energy Administration, has decided to suspend its implementation of the ban, which has faced concerted opposition from Chinese power companies.
A trader at one of China's largest five power generation companies said he had read reports about the possible suspension of the imports ban and gave his interpretation of what it might mean for the market.
"Looks like it is delayed," said the trader, commenting on the proposed coal imports ban.

Study Finds the Effect on Humans of Burning the Fuel Is Likely Worse Than Thought.
BEIJING—Air pollution from coal combustion likely cut life expectancy in parts of China by more than five years during the 1990s, a study has found, adding weight to increasing public demands for Beijing to clean up the environment.

The effects on human health from China's high levels of pollution are likely worse than experts had thought, according to a new study by researchers at the Massachusetts Institute of Technology and three other universities. The report released Monday looks at life expectancy in parts of China, taking into account the amount of coal burned and government policy on coal use.

By Brad Plumer, Published: July 8, 2013 at 4:12 pm
Here’s a stunning stat: A government policy to promote coal use in Northern China may have cut the life expectancy of 500 million people by more than five years, on average.

Life expectancy in northern China was 5.5 years shorter than in southern China in the 1990s, and a health risk disparity lingers today, a difference almost entirely due to heart and lung disease related to air pollution from the burning of coal, a new study shows.

By Isaac Arnsdorf - Jun 26, 2013 7:31 AM GMT-0800
FChinese imports of coal to generate electricity for summer is increasing demand for shipping as its stockpiles drop, according to Commodore Research & Consultancy.
Two Capesizes and three Panamaxes were booked to carry coal to China today, compared with seven vessels during all of last week, Jeffrey Landsberg, New York-based managing director of the adviser to ship owners, said in an e-mailed report today. Stockpiles at Qinhuangdao, the country’s main coal port, fell 6 percent since the end of last week to 6.7 million tons, below the level that officials seek to maintain, Landsberg said.

A slight recovery in thermal coal prices from September is possible as coal buyers in the northern hemisphere start to stockpile for winter, but the price hike is seen as temporary, market sources said Monday. "There is a very strong possibility of prices consolidating starting in September. The Chinese will start stockpiling for winter. It can help trigger a consolidation but it will be seasonal, at least. Where it goes from there, nobody knows," a Hong Kong-based broker said.
Over the last few years, Chinese thermal coal buyers typically import coal before and shortly after the October Golden Week holidays in the first week of the month, the broker said.
"This is the silver lining despite news everywhere and everyday of falling coal prices," he added.
--Cecilia Quiambao, cecilia.quiambao@platts.com --Edited by Irene Tang, irene.tang@platts.com

USA
Arch Coal to Sell Utah Mines for $435 Million Bloomberg - Sonja Elmquist - Jun 28, 2013
Arch Coal Inc. (ACI), one of the most indebted U.S. coal producers, agreed to sell three Utah mines from its most profitable division for $435 million as the company tries to cut costs amid falling coal prices.
The company will sell the Sufco, Skyline and Dugout Canyon mines and 105 million tons of reserves to closely held Bowie Resources LLC, Arch said in a statement today. Arch said it will record a $120 million pretax gain from the deal.

While our electricity prices necessarily skyrocket under the weight of the administration's regulatory assault in fossil fuels, the world's largest carbon emitter will spew even more, preferring economic growth over climate change hype.
President Obama's expansion of his war on coal to include existing coal plants may very well put the industry on the path to extinction, costing jobs and economic growth while raising energy prices, a huge tax on the American consumer. But countries like China and India are increasing their coal consumption, more than outpacing any U.S. reductions in coal use and carbon emissions.

Big Coal to Fight Obama Plan Bloomberg News 
Mining Firms Fear Impact of President's Proposals to Combat Global Warming
A Consol mine in Pennsylvania. The industry will lobby against rules it fears will further damp coal demand.
The beleaguered domestic coal industry, bracing for the possibility that no more coal-burning power plants will ever be built on U.S. soil, is teaming up with other business groups to blunt the impact of President Obama's climate-change agenda, while also shifting its business focus to exports.

Reuters reported that Mr Dave Steinberg often feels like one of the last remaining bulls in the tumbling US coal market and even he struggles to put a happy face on the industry.
Mr Steinberg said that coal stocks have been terrible, a managing partner at Chicago based DLS Capital Management, which oversees USD 350 million in assets and owns positions in coal producers such as Peabody Energy Corporation, Arch Coal Inc and Alpha Natural Resources.
Each stock had fallen more than 40% for the year at Thursday's close, and was down at least 24% this month, to levels Mr Steinberg calls absurd. All told, Steinberg has lost more than I would like to admit.

...They also note coal-to-gas switching has slowed, though they argue this is bullish long-term and reflects a structural tightening shift in the demand curve.

Ernest Moniz defends strategy to cut carbon emissions, but says coal remains part of energy mix
US president, Barack Obama, announces his action plan on climate change at Georgetown University in Washington, DC. Photograph: Alex Wong/Getty Images
The US government is not waging a "war on coal" but rather expects it to still play a significant role, energy secretary Ernest Moniz said on Sunday, rejecting criticism of President Barack Obama's climate change plan.

The U.S. will stop financing coal plants abroad. That’s a huge shift. (Washington Post) By Brad Plumer, Published: June 27, 2013 
One of the more significant lines in President Obama’s climate-change speech this week got relatively scant notice. In a major policy shift, Obama said he would place sharp restrictions on U.S. government financing for new coal plants overseas.
... The announcement comes after years of federal support for coal projects 

Company (Ambre) unable to come up with $70M for Montana coal mine takeover

Up To 75 employees of Montana's Decker Coal Mine will be laid off from the surface mine near the Wyoming border in mid-January, managers said Friday.
A spokesman for mine operator Ambre Energy North America attributed the layoffs to "ongoing expense management activities," but offered no details. It is co-owned by Ambre-subsidiary KCP Inc. and Western Minerals LLC, a subsidiary of Cloud Peak Energy.
About 160 people work at the mine located in the coal-rich Powder River Basin, an area along the Montana-Wyoming border that produces more coal than any other region in the U.S. The mine is located in Big Horn County, although many of its workers come from the Sheridan, Wyo. area....Ambre spokesman Brian Gard said in a statement that the layoffs were unrelated to a legal dispute between the owners over whether to expand production.

Montana coal mine beset by financial problems July 06, 2013 9:40 am  •  Associated Press
More signs of problems have emerged with an Australian company's bid to take over a Montana coal mine, as court documents reveal Ambre Energy has been unable to come up with more than $70 million in cash to close on the deal.

The Decker mine near the Wyoming border is co-owned by Ambre and Wyoming-based Cloud Peak Energy. Ambre wants full ownership as part of its ambitious plans to ramp up coal exports to Asia through two West Coast ports.

Decker last year was the subject of a management quarrel between its owners that led to a lawsuit in U.S. District Court. The two sides struck a tentative deal in December - shortly before about a third of the mine's workforce was laid off - but have since asked the court to extend their settlement deadline three times.

The latest request, to push back the deadline from July 12 to Aug. 30, was granted earlier this week by U.S. Magistrate Judge Carolyn Ostby. The judge indicated that this will be the final chance for the companies to work out a deal before the lawsuit proceeds to trial in September.

Cloud Peak and Ambre said in court documents that their ability to close the sale depended on "Ambre's ongoing financing efforts to obtain cash collateral." That cash is needed to cover $70.7 million in outstanding reclamation and lease bonds for the mine that are held by Cloud Peak.

Research group raps Australian coal company interested in U.S. shipments
BILLINGS — An environmental research group says an Australian company seeking to ramp up U.S. coal shipments to Asia has financial problems that could hobble its export ambitions.
The Seattle-based Sightline Institute said Wednesday that a review of Ambre Energy's finances shows it is falling deeply into debt and faces hundreds of millions of dollars in mine-cleanup liabilities.
Ambre is seeking to expand shipping terminals in Oregon and Washington to export coal, including from recently-purchased company mines in Wyoming and Montana.
The company said in a statement that the Sightline report was biased.
Ambre says it has solid financial backing from Colorado-based Resource Capital Funds. It also has a coal supply agreement with two Korean companies and a joint venture deal with industry giant Arch Coal, Inc. for Washington's proposed Millennium port.

AUSTRALIA
BY:RHIANNON HOYLE From: Dow Jones June 26, 2013 11:10AM
AUSTRALIA'S coal sector is at a critical juncture, with sustained weakness in commodity prices likely to prompt further cutbacks and job losses at a time when rival exporters are intensifying competition for customers, Anglo American's chief executive said.

CANBERRA--Australia's coal sector is at a critical juncture, with sustained weakness in commodity prices likely to prompt further cutbacks and job losses at a time when rival exporters are intensifying competition for customers, Anglo American PLC's (AAL.LN) chief executive said Wednesday.
"The Australian coal industry is at a tipping point for future growth and will only survive if governments want the sector to invest in the country and grow," Mark Cutifani told a Minerals Council of Australia conference in Canberra.
He said Australia's coal sector was facing increasing competition from exports out of Colombia, South Africa and Indonesia.
"Now the U.S. and Canada, which were formerly high cost producers compared to Australia, have emerged as aggressive cost competitors," said Mr. Cutifani, who replaced Cynthia Carroll as Anglo American's chief executive earlier this year.

Thu Jun 27, 2013 5:11am EDT
* Glencore cuts 3 mln T coal output at Newlands, Oaky Creek
* Job cuts will shrink labour force at the mines 25 pct
* Output, labour cuts follow 40 pct decline in coal prices

PERTH, June 27 (Reuters) - Glencore Xstrata said on Thursday it has cut back coal production and laid off 450 workers at two of its Australian coal mines due to falling coal prices, higher costs and the strength of the Australian dollar.
The latest cuts will shave off about 3 million tonnes of coal production at Glencore's Newlands and Oaky Creek mines, according to a source familiar with the matter.

Brazilian miner Vale is selling the Degulla coal mine in Queensland's Galilee Basin.
Brazilian resources giant Vale is selling a Queensland coal mine, following retrenchments and asset writedowns across its Australian operations.
The group's Degulla mine in the Galilee Basin will become its third Australian coal asset to be put on the market, Fairfax Media reports.


Coal Giants’ Lay Offs Could be a Boon to Oversupplied Australia Monday July 1, 2013, 4:15am PDT By Charlotte McLeod - Exclusive to Coal Investing News
The big news in the coal sector last week was unfortunately not particularly positive. In a series of blows for Australia, mining giant Glencore Xstrata (LSE:GLEN) laid off 46 employees at its Ravensworth coal mine, along with another 450 from its Newlands and Oaky Creek mines, while Peabody Energy (NYSE:BTU) said it plans to eliminate about 450 contractor jobs at its operations in Queensland and New South Wales. 

A mining company with plans to develop a coal project in Western Australia's north west has sold its investment to a Chinese consortium, due to the challenging market conditions.
Rey Resources wanted to develop the Kimberley coal deposit. However, low thermal coal prices convinced the company to focus on its established oil and gas prospects in the region.
The company says it sold its Duchess Paradise deposit for $21 million to Hong Kong company Crystal Yield Investments.

Coal facing a 'structural decline' BY:ANDREW BURRELL From: The Australian June 29, 2013
COLIN Barnett has delivered a downbeat outlook for Australia's two most valuable export commodities, arguing that coal is facing a long-term structural decline and warning that the iron ore industry's period of record growth has ended.

But the West Australian Premier told The Australian & Deutsche Bank Business Leaders Forum in Perth yesterday that he did not believe his state was facing a recession as some had predicted.
He said while the WA resources sector would suffer cyclical peaks and troughs, it would continue to drive growth for decades.
But Mr Barnett's gloomy outlook for commodities contrasted sharply with his upbeat assessment at the same Perth event a year ago when both coal and iron ore were trading well above present levels.

He saved his most dire warning for coal, which is produced mainly in NSW and Queensland rather than WA.

"The change in the coal price is beyond cyclical: it is a structural change," he said. "And while coal remains the world's most used fuel for power generation and other purposes, the world is making policy decisions which mean that coal usage, in my view, will progressively decline. It's a long-term structural change and that should not be dismissed as something that is purely cyclical."

Coal gloom as Glencore cuts 450 jobs BY:PAUL GARVEY From: The Australian June 28, 2013 12:00AM
THE drastic reversal of fortunes in the coal sector has claimed a further 450 jobs, with global mining and commodities giant Glencore Xstrata flagging deep cuts to its Queensland workforce, taking jobs lost from the industry this week to more than 1000.

Glencore Xstrata blamed lower coal prices, higher costs and the strong Australian dollar for the decision to scale back operations at its Newlands and Oaky Creek mines. About 300 employees will be sacked at Newlands while 150 jobs will be lost at Oaky Creek, taking the total number of coalmining jobs lost in Australia in the past year to about 10,000.

More mining canaries croak Posted by Unconventional Economist in Australian Economy - on June 28, 2013
By Leith van Onselen
It’s been a bad few months for mining-related industries.
In early May, I noted how falling mining equipment sales could be a harbinger of a sharper than expected reduction in mining capex.
Over the remainder of May, we then witnessed a spate of mining services firms – Coffey, UGL, Worley Parsons, Transfield Services, and Boart Longyear lower their earnings guidance and/or cut jobs amid slowing mining activity.

Now, heavy machinery dealer, WesTrac, which supplies Caterpillar machinery such as bulldozers and trucks to miners and builders, has today announced that it will cut 350 jobs – roughly 10% of its workforce – amid “challenging market conditions”.

INDIA
India is burning coal in power plants at the fastest pace in 31 years.
At the same time, domestic supplies of natural gas that are the main alternative are falling at the quickest rate in Asia, data from 2012 compiled by BP Plc (BP/) show. Both trends run counter to those in most major economies and give India clout over global coal prices.

India’s growing appetite for imported coal should benefit suppliers in the $69 billion global coal trade such as BHP Billiton Ltd. and Indonesia’s PT 

INDONESIA, JAPAN, MONGOLIA, Freight Rates, Entertainment, pension and other self-indulgent news
Manila (Platts)--13Jun2013/617 am EDT/1017 GMT

Environmental concerns and technology issues will be the main stumbling blocks for power utilities in Japan to accelerate their imports of sub-bituminous coal, industry sources said Thursday.

Market players were stirred by an announcement this month by a representative of Chubu Electric Trading that Chubu Electric is trial burning low calorific value coal at the Hekinan power station.

Toshimi Tsuchiya, director of Chubu Energy Trading (CET) Singapore, has said Chubu is trial burning thermal coal with a calorific value of 5,000 kcal/kg net-as-received for Hekinan to cut on fossil fuel costs, which soared with the shutdown of a majority of Japan's nuclear power plants.

However, coal procurement executives of two Japanese power utilities (JPUs) told Platts that electric companies are facing limitations despite their desire to increase the importation of sub-bituminous coals from Indonesia and the US. 

The Jakarta Post reported that with the government planning to increase royalty demands imposed on miners under mining permits to 13.5% of net sales next year, industry players deem the proposal untimely given the declining coal prices.

Panamax coal freight rates on established routes from South Africa's Richards Bay and Indonesia to India ended the week lower on Friday as fixture activity eased, sources said.
....Vessels open in South China have been steadier, with reasonable Indonesian coal volumes and collective owners' preference for long duration trips in anticipation of slow summer period have kept discount rates at bay, broker Braemar Seascope said in its weekly note.
..."The Pacific market has been mixed with North China positions struggling due to limited demand from [North Pacific] NoPac/east coast Australia," the broker added.

The Mongolian Ministry of Environment and Green Development has announced the closure of Tsagaan Khad, a coal customs stockyard on the Mongolian side of the border with China, citing environment damage from coal haulage, but the measure has yet to be enforced, a marketing executive at a local coal mining company told Platts Wednesday.
...The news is of greater importance for steelmaking metallurgical coal than for thermal coal, for which Mongolian January-May exports only amounted to 1 million mt.

--Julien Hall, julien.hall@platts.com,--Edwin Yeo, edwin.yeo@platts.com,--Edited by Jeremy Lovell, geetha.narayanasamy@platts.com

Orrin Hatch of Utah, the senior Republican on the Senate Finance Committee, has devised a way for states and cities to exit the pension business while still giving public workers the type of benefits they want. It involves a tax-law change that would enable governments to turn their pension plans over to life insurers.