ARRC Update Feb 12th

USA:

Interior Responds to Wyden, Murkowski Coal Letter 

The Department of the Interior (DOI) has developed an action plan and convened a task force – with a focus on sales to overseas markets – to ensure that coal companies are properly reporting and paying royalties.  

Coal exports a major focus for US producers as supply needs change: execs 

A lack of global supply to meet projected overseas demand for thermal coal has US coal producers shifting their focus to exports, said executives Thursday at the Coaltrans USA conference in Miami, Florida.

INDONESIA:

1) Komatsu cuts forecast on Indonesia coal mining slump

Japan's Komatsu Ltd, the world's second-biggest maker of construction machinery, cut its annual profit for a second time as demand for mining equipment in Indonesia tumbled on the back of steep declines in thermal coal prices

2) Risk persists for Indonesian coal miners - S&P 

According to recent research by rating agency Standard & Poor’s, Indonesian coal miners will continue to feel the pinch of last year’s price weakness which in turn could erode their profitability for 2013.

CHINA:

1) Is China Big Coal's Cash Cow? Maybe Not

Increasing domestic supply could mean U.S. coal suppliers get the slip. IHS CERA came out with a long-term forecast that says China coal demand will peak soon and that its usable supply will increase as transportation capacity begins to catch up with the growth of domestic output.

2) Survey predicts 10% fall in coal imports 

China's coal imports will decline 10 percent year-on-year in 2013, the first drop in five years, due to increasing domestic supply and the country's improved transportation network, according to a Thomson Reuters survey.

3)  Great chart from EIA  that appeared in many articles:

4a) Time for change: China flags peak in coal usage

John Garnaut, a journalist who writes about Chinese politics and seems to have better access to Chinese leadership circles than most other journalists, wrote this short piece saying that Chinese experts saw their coal use is having peaked. The stats came from the energy research institute of NRDC, which has more power to act than the separate environmental bureau. The numbers don't seem to add up; but still this means that the Chinese government is paying attention. In a more concrete signal that Chinesepolicymakers cannot ignore the air pollution problem, China announced new emissions standards that had been stalled over the last three years as a result of disagreements between refiners and automakers. See 5).

4b) 'Too late' for China to cap coal use at 4b tonnes

An apparent response to John Garnaut's piece in the same publication. Article quotes UBS commodity analyst Tom Price ‘‘It’s highly likely their coal consumption rate will continue to lift by at least a couple of per cent,’’ he said, describing the 4 billion-tonne target as a ‘‘nice academic exercise’’.

5) China acts to combat air pollution

China has announced aggressive new standards for vehicle fuel in an effort to combat air pollution, its first concrete response to the heavy smog that has blanketed many Chinese cities this winter.  On Wednesday night the state council said that a new, low-sulphur standard for automotive diesel would become mandatory by the end of 2014. A stricter ultra low sulphur standard for both gasoline and diesel will take effect by 2017.  In addition to showing determination to address air pollution, this was also seen as a possible sign of the new government's willingness to limit the influence of SOEs.

Is China Big Coal's Cash Cow? Maybe Not
Increasing domestic supply could mean U.S. coal suppliers get the slip

USA Today

MEG HANDLEY

Although China's ravenous appetite for energy continues to grow, the East Asian nation might not be the limitless cash cow Big Coal was hoping for according to a new study.
Recent research from analytics firm IHS CERA shows that while China gobbles up about as much coal as the rest of the world combined, demand for the fuel will peak before the end of the decade and decline steadily through 2035.

Survey predicts 10% fall in coal imports (CHINA)
China Daily

Du Juan

China's coal imports will decline 10 percent year-on-year in 2013, the first drop in five years, due to increasing domestic supply and the country's improved transportation network, a Thomson Reuters survey showed.

China - the world's largest coal importer - will import up to 210.8 million metric tons of the commodity in 2013, it said.

激斗油品国标
财新《新世纪》
记者 王小聪

Caixin's in depth analysis of China's fuel standards (especially Beijings new V standard) and a description of the how the automotive manufacturers and the oil refiners are at odds on what to do, and on the evolution of new standards in the standard setting body. Contains thorough analysis of the refining fundamentals that put the car mfg and the refiners in oppostion, i.e., how 降硫禁锰 (jiang4 liu2 jin1 meng3) decreasing sulfur and removing manganese lowers octane ratings (辛烷值 xin1wan2zhi2) which decreases fuel efficiency and causes knocking. This is because 70% of China's refining capacity is for heavier crude. At present the Octane ratings are being overstated in Beijing although the prices were not dropped. It was a hidden price increase. Who bears the costs of having cleaner fuel in the long run? The consumer.



China acts to combat air pollution
FT
Leslie Hook in Beijing


China has announced aggressive new standards for vehicle fuel in an effort to combat air pollution, its first concrete response to the heavy smog that has blanketed many Chinese cities this winter.
On Wednesday night the state council said that a new, low-sulphur standard for automotive diesel would become mandatory by the end of 2014. A stricter ultra low sulphur standard for both gasoline and diesel will take effect by 2017.

Wednesday’s announcement singles out the oil companies – CNPC, Sinopec and Cnooc – and mandates that they complete the necessary upgrades to their refineries on time.

Because low-sulphur fuel is more expensive to produce, Chinese oil companies had lobbied for years to delay stricter fuel and vehicle emissions standards. One example is a new standard for exhaust emissions for diesel trucks that was supposed to go into effect in 2011, but was delayed several times because the oil companies did not produce compliant fuel.

Vehicle emissions, along with coal burning, are a major cause of air pollution. In Beijing at least 19 per cent of small particulate matter – the kind that can trigger respiratory and heart disease – comes from vehicles, according to the Chinese Academy of Sciences.

The state council said in its statement: “With vehicle ownership growing quickly, the impact of tailgas emissions on air pollution increases every day.”

As public anger over pollution has grown, China’s oil companies have had to go on the offensive to address the criticism. Fu Chengyu, head of Sinopec, China’s biggest oil refiner, admitted last week that oil refineries bore some of the responsibility for air pollution, but defended Sinopec’s oil products as fully compliant with national standards.

By choosing to target fuel standards, the state council has effectively called the oil companies to task, an approach that could signal a tougher attitude towards state-owned enterprises from China’s leadership. It represents a major victory for China’s relatively toothless environment ministry, which has often found its policies and regulations stymied or ignored by more powerful government bodies.

Politics of pollution: China's oil giants take a choke-hold on power

Reuters

By Sui-Lee Wee and Hui Li

BEIJING | Sat Feb 2, 2013 6:10pm EST

The search for culprits behind the rancid haze enveloping China's capital has turned a spotlight on the country's two largest oil companies and their resistance to tougher fuel standards.

Bureaucratic fighting between the environment ministry on the one hand and China National Petroleum Corp (CNPC) and Sinopec Group on the other has thwarted stricter emission standards for diesel trucks and buses -- a main cause of air pollution blanketing dozens of China's cities.

To be sure, many sources contribute to air pollution levels that hit records in January, but analysts say the oil companies' foot-dragging and disregard of environmental regulations underscore a critical challenge facing a toothless environment ministry in its mission to curb air pollution.

With widespread and rising public anger changing the political calculus, it also poses a broader question of whether the incoming administration led by Communist Party chief Xi Jinping will stand up to powerful vested interests in a country where state-owned enterprises have long trumped certain ministries in the quest for economic growth at all costs.

"I think the Communist Party's new government should weaken CNPC and Sinopec," said Wang Yukai, a professor from the National School of Administration. "These interest groups have too much power."

Delays in implementing stricter emission standards are rooted in money -- chiefly, who should pay for the price of refining cleaner fuels? By some estimates, auto emissions contribute as much as a quarter of the most dangerous particles in Beijing's air.

To supply cleaner diesel, the oil firms must invest tens of billions of yuan (billions of dollars) to remove the sulfur content, said Xiaoyi Mu, a senior lecturer in energy economics at the University of Dundee in Scotland.

PetroChina, the listed arm of CNPC, said in a statement sent to Reuters that all automotive diesel produced by PetroChina in 2012 met existing Chinese emissions standards.

It added PetroChina would "push forward upgrading of fuel quality, and supply clean, good quality and diversified products".

Sinopec did not respond to repeated phone calls from Reuters seeking comment.

Sinopec chairman Fu Chengyu, quoted in state news agency Xinhua last week, acknowledged that China's refineries are one of the main parties that should bear responsibility for air pollution. Even so, he added that was not because fuel failed to meet standards but rather because fuel standards were not sufficient.

ONGOING FEUD

The bureaucratic tug-of-war has been going on for years.

Frustrated by the repeated delays in enforcing existing environmental standards, China's deputy environment minister, Zhang Lijun, called a meeting in late 2011 with officials from the country's two biggest oil companies.

In unequivocal statements, he sought to lay down the law: The ministry was not going to further delay the cleaner China IV emission standard for trucks and buses, despite reluctance by CNPC and Sinopec to supply the fuel that would cost more to produce.

"If the sulfur content in your oil is too high and does not meet the standards, and if cars break down, it'll be your responsibility. The environment ministry will have nothing to do with it," Zhang said, according to Tang Dagang, director of the Vehicle Emission Control Center, who was present at the meeting.

The officials from the oil companies responded by promising to supply the cleaner fuel after the Lunar New Year in 2012, a traditional holiday that fell in January that year.

But a few months later, a spot check by the environment ministry showed the companies were still supplying ordinary diesel, said Tang, whose policy research group is affiliated with the ministry.

With media focusing on a sudden worsening of the air quality in Beijing at the start of 2013 -- 21 days in January recorded "heavily polluted" levels or worse -- urban residents are increasingly impatient with the political wrangling.

"The air pollution is terrible," said Beijing resident Zhang Shuqing on a recent very polluted day. "They need to sort it out, the department responsible needs to sort out the environment."

The environment ministry, however, faces formidable odds in the face of China's complex bureaucracy and weak enforcement of laws.

BUREAUCRATIC MAZE

At least 10 government entities such as the powerful National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) shape policies that affect the environment.

Unlike the U.S. Environmental Protection Agency, the environment ministry has no power to set fuel emission standards, and sometimes it is not even consulted on decisions taken by other government departments that would affect the environment.

For example, when the MIIT and the NDRC held a meeting to deliberate on a policy subsidizing energy-saving cars, they never contacted the environment ministry, said Ding Yan, deputy director of the Vehicle Emissions Control Center. As it turns out, some of these cars are actually relatively heavy polluters.

In 2008, China promoted the State Environmental Protection Administration to a full ministry in a bid to give it more weight in the country's fight against pollution.

Yet the ministry still lacks the authority to force big state-owned enterprises and local governments to toe the line. The ministry did not respond to a request for comment.

"Even a powerful environment minister is of no use," Ding said. "You need the highest leaders like Xi Jinping and Li Keqiang to really value the work of the environment ministry."

THE COST OF CLEAN AIR

Excessive pollution levels have already prompted the Beijing government to roll out a series of temporary emergency measures such as shutting down 103 heavily polluting factories and taking 30 percent of government vehicles off roads, but the capital's air has remained hazardous.

It remains unclear whether Xi will restrain the influence of the oil firms, but with public anger rising, and with a normally compliant media joining in the calls for action, political pressure is growing.

The problem for oil firms such as PetroChina, the listed arm of CNPC, and Sinopec is that central planners set prices at the pump, even when global energy costs remain high.

Tang said both CNPC and Sinopec have told the environment ministry that they would have supplied the fuels "if they had gotten a reasonable price".

Jiang Kejun, research professor at the NDRC's Energy Research Institute, says it is unreasonable to demand that CNPC and Sinopec bear the cost of refining cleaner fuels.

"I'm an environmentalist and I also hate the actions of CNPC and Sinopec," Jiang said. "But we have to tell the public: energy prices will rise significantly. To enjoy both low energy prices and also fresh air, there's no way you can have both."

With no supply of cleaner diesel fuel, Beijing had to delay the implementation of the China IV emission standard for diesel trucks and buses twice -- first in 2011 and then later in 2012, when it was extended to this July.

The new standard aims to cut emissions of particulate matter and nitrogen oxides -- two key components of urban smog -- from trucks and buses by 80 percent and 30 percent, respectively, said Vance Wagner, a senior researcher at the International Council on Clean Transportation.

"Diesel vehicles, especially trucks and buses, are a disproportionately large source of emissions," Wagner said in emailed comments. He cited environment ministry data that showed large trucks comprise only about 5 percent of China's vehicle fleet, but emit over 60 percent of particulate matter emissions.

In response, China's finance ministry has stepped in to negotiate preferential tax policies with the oil firms to help offset the higher costs of producing cleaner diesel fuel, say people close to the environment ministry.

Chinese media reported last week that new cleaner diesel fuel standards, similar to Euro IV standards that restrict sulfur content, could be issued soon in addition to the existing emissions standards. Even the new requirements, however, could give oil companies a two-year window for full compliance.

Without intervention at a higher level, the delays are likely to go on.

Yue Xin, head of the vehicle fuels and emissions lab at the Chinese Research Academy of Environmental Sciences, has spent more than three years sparring with CNPC and Sinopec on a committee that sets fuel standards.

Yue is one of two members representing the environment ministry on the panel while about 70 percent of the representatives are from the oil firms.

Now, Yue, whose group is affiliated with the environment ministry, is lobbying for the oil firms to put "detergents" in its gasoline, which will burn fuel cleanly.

The oil firms oppose it because of the costs, Yue said.

(Additional reporting by Maxim Duncan, Jimmy Jian, Terril Yue Jones and Beijing Newsroom; Editing by Ken Wills)

Sinopec boss passes the buck to government
Shanghai Ri Bao
Fu Chenghao


SINOPEC Corp Chairman Fu Chengyu's recent remarks on the worsening air quality in parts of China since the beginning of 2013 is not only a massive public relations disaster but also highlighted a serious lack of responsibility.

Fu, head of China's largest fuel supplier, acknowledged that the nation's refineries were among the culprits for the toxic smog that is choking Beijing and other cities. But he told Xinhua news agency last week that it was not that the refineries failed to meet the air-quality standards in the country but the government standards were rather lax.

In other words: "It's not our fault."

Fu was responding to media reports that pointed to the high sulfur content in fuels sold by his company and others.

Maybe what Fu said was true but it seems a bit disingenuous of him to just shirk the whole responsibility by blaming the government, the company's ultimate parent.

Let's face it, oil majors like Sinopec wouldn't want tougher fuel standards because that would mean upgrading their refining facilities, leading to higher costs and smaller margins in a system where the government still caps fuel prices to keep inflation in check.

These state oil majors, in their quest for growth at all costs, have strong lobbying power to resist tougher emissions standards, even trumping over government agencies such as the Ministry of Environmental Protection.

Currently, Beijing has the strictest emission standards among cities on the Chinese mainland, the so-called National V - similar to Euro V standards. Yet the nation's capital is among the worst hit by air pollution, largely due to its huge car population, the burning of dirty coal for heating and even its geography.

Surrounding mountains form a semi-circular basin that traps pollutants in a city that managed to clean up the air long enough to host the 2008 Olympic Games.

The pollution has been so severe some days that Beijing municipal officials have had to warn residents to stay indoors and issue rulings forcing some government vehicles off the roads.

Much of China still uses the National III vehicle emissions standards, which are similar to the Euro III standard - allowing the sulfur content in gasoline to be as high as 150 parts per million.

The Euro V standard caps the sulfur content at below 10 ppm.

Shanghai and some relatively developed regions like Jiangsu and Guangdong use the National IV standard.

Sinopec is not violating any rule or law in supplying most of China with National III standard fuel. But it does benefit from relatively low fuel quality standards.

Fu's response to hazardous levels of air pollution hardly reflects the image of a major state company fond of touting its corporate social responsibility.

Not surprisingly, his remarks unleashed a flurry of criticism from the media and on the Internet.

"Sinopec has acknowledged fuel is one of the culprits behind the bad air quality, but it's also good at evading the responsibility," one online post read.

Trying to dispel the public backlash, the company last Friday said it will upgrade desulfurization facilities at 12 subsidiaries by the end of this year, and will start selling cleaner gasoline that meets the National IV standard from next year. But that only triggered concerns about higher fuel prices.

This is not the first time Sinopec has run into trouble. In 2011, the company used its own workers to post online comments, supporting a rise in refined fuel prices, that would benefit the company's bottom line while making it dearer for motorists.

Fu might be advised to hire a new public relations team and think twice before commenting on sensitive issues.

Time for change: China flags peak in coal usage
John Garnaut

China’s decade-long boom in coal-driven heavy industry is about to end as the leadership shifts priorities towards energy conservation, say officials and policy advisers.

The advisers predict China’s coal consumption will peak at only a fraction above current levels after the State Council, or cabinet, last week set an ambitious new total energy use target for the five-year plan ending 2015.

“Coal consumption will peak below 4 billion tonnes,” Jiang Kejun, who led the modelling team that advised the State Council on energy use scenarios, told Fairfax Media.

“It’s time to make change,” said Dr Jiang, who is director of the Energy Research Institute under the National Development and Reform Commission (NDRC). “There’s no market for further development of energy-intensive industry.”

The imminent stabilisation of coal usage, if broadly achieved, would mark a stunning turn-around for a nation that is estimated to have burned 3.9 billion tonnes last year, which is nearly as much as the rest of the world combined.

The move would also bring some relief in the fight against global warming.

Income shock for Australia

And it would trigger a negative income shock to Australia, the world’s biggest exporter or coal and iron ore, with significant implications for government budget forecasts.

Dr Jiang said the energy targets would bite hardest with energy-intensive heavy industries such as steel - dependent on iron ore and coking coal - which he said had saturated their potential markets and could no longer make money.

Thermal coal-powered electricity generation would continue to expand at a low pace, he said.

In the first 12 years of this millennium, China increased annual coal use by a staggering 2.4 billion tonnes, or 163 per cent, accounting for more than four-fifths of global coal consumption growth.

In five years China’s net coal imports have surged from negligible levels to about 200 million tonnes, driving up the international price.

Last year China bought 19.5 per cent of Australia’s thermal coal exports worth $2.8 billion; 17.5 per cent of coking coal ($3.5 billion) and 72.5 per cent of iron ore ($38.6 billion), according to estimates by Kieran Davies, an economist at Barclays Bank.

Foreign energy analysts are mostly sceptical that China can meet its “non-binding” energy goal, pointing out that it missed its 2010 target by a large margin.

They are broadly unconvinced that the energy targets can be achieved without an intolerable drop in the GDP growth rate.

Chinese officials and analysts acknowledge that state-owned enterprises, regional leaders and their political patrons have resisted or ignored previous edicts.

'Political requirement'

But they say the economic growth is now ready to be weaned from its addiction to coal and the State Council decision - including to apportion responsibilities to local governments and enterprises - shows a stronger political consensus has been reached to mobilise the bureaucracy.

Pan Jiahua, who heads a team of climate change economists at China's leading think tank, the Chinese Academy of Social Sciences, told Fairfax Media that the State Council’s endorsement of the energy target had the effect of elevating it into a “political requirement”.

He said officials in local governments and state-owned enterprises would now be judged partly on their ability to meet energy targets while a long list of green slogans, incentives and policies were translating into concrete measures.

Professor Pan said energy security remained the primary motivation behind the measures but last month’s record pollution readings in North China had contributed to the hardening of political will.

“Chinese people have done enough tolerating such bad air,” he said.

The State Council last week set a total primary energy consumption target (including renewable energy and transport fuel) of 4 billion tonnes of “standard coal equivalent” in the five years to 2015. Confusingly, 1 tonne of actual coal equates to about 0.68 tonnes of coal equivalent, according to Dr Jiang.

With two years of the plan period already used up, the target translates to annual growth in energy consumption of about 3.5 per cent over the next three years, down from 6.6 per cent per year in the five years to 2010.

A proportion of the increase will be absorbed by hydro, wind, solar and nuclear – which are all benefiting from strong government assistance - at the expense of coal.

Officials at NDRC have been telling visiting delegations in recent days that coal consumption will peak below 4 billion tonnes and the government would do “whatever it takes” to hit the overall energy use targets.

Professor Pan predicted coal consumption would peak at less than 4.2 billion tonnes by 2015 while other global commodities markets would be hit at least as hard.

He said a continuing increase in coal-powered electricity generation would be offset by a production plateau in key heavy industries.

“I don’t think there will be further scope for expanding iron and steel production, or cement,” he said.

Professor Pan said there was no question the State Council would meet its target but he noted that  measurement methods were not robust.

“In some cases statistics may not be able to provide accurate information and some numbers may have to be estimates, which gives a certain degree of flexibility.”


'Too late' for China to cap coal use at 4b tonnes
Australia’s coal industry doubts China will be able to cap its coal use by 2015, without abandoning its commitment to economic growth.

There’s a long way to go before (China's) coal demand peaks. It’s certainly not going to peak in this five-year plan.

BusinessDay today reported that China’s coal consumption was predicted to peak close to current levels as the leadership in Beijing shifted priorities towards energy conservation.

But UBS commodities analyst Tom Price said it was ‘‘too late’’ for China to cap coal use at 4 billion tonnes, as in 2012 it consumed 4.05 billion tonnes, counting raw production of 3.8 billion tonnes plus net imports of 227 million tonnes. China’s gross coal imports jumped 32 per cent last year, he said.
Mr Price said China’s monthly raw coal production statistics did not factor in coal washing which could reduce yields and increase calorific values.

Mr Price said the National Development and Reform Commission’s targets basically called for ‘‘flatlining’’ energy use, an unreasonable forecast because China depended on coal for 80 per cent of its power.

One senior energy industry executive based in Australia said China’s aim of achieving a peak in energy demand below 4 billion standard coal equivalent tonnes was an ‘‘aspirational target’’.
The real question, he said, was whether China’s leaders were ‘‘ever going to ration energy in order to achieve some emissions objective ... (and) throttle economic growth’’.

While much of the media coverage of the recent air pollution in China’s north concentrated on emissions from burning coal, about a third of the pollution was from transport fuels and Beijing’s electricity came mostly from gas-fired power stations.

* China’s ‘standard coal equivalent’ measure assumes coal has a calorific value of 7000kcal per tonne. In reality Chinese thermal coal has a much lower calorific value, about 5000-5500kcal/t, while thermal coal shipped from Newcastle typically has a calorific value of 6000-6300kcal/t - meaning it takes more than a tonne of coal to generate the energy of one standard coal equivalent.

Coal exports a major focus for US producers as supply needs change: execs
Miami (Platts)--31Jan2013/501 pm EST/2201 GMT

A lack of global supply to meet projected overseas demand for thermal coal has US coal producers shifting their focus to exports, said executives Thursday at the Coaltrans USA conference in Miami, Florida.
"When you look at demand growth around the world, and try to match that with supply, they don't match up, so there is clearly a gap," said John Eaves, CEO of St. Louis-based Arch Coal.
...
Overseas prices are down currently and as a result, export margins are tight, said Kevin Crutchfield, CEO of Alpha Natural Resources.
But based on long-term projections made by the company and the US Energy Information Administration, which predicts coal will become the world's primary fuel for electricity generation within the next few years, Crutchfield said the company is changing its strategy.
...
WEST COAST TERMINALS WILL HAPPEN: ARCH
"We think we'll win this fight," said Eaves, commenting on the proposed terminals in Washington and Oregon. "It will take a while but -- I think port capacity on the West Coast is important, because over time we think more Western coals will be going into Asian markets."
Eaves said planned US port expansion could push the nation's export capacity to 250 million tons by 2017.
Five terminals have been proposed in Washington and Oregon. A sixth coal export terminal at Port of Grays Harbor's Terminal 3 in Hoquiam, Washington, was proposed by RailAmerica, but the short-line railroad decided to shelve plans for the 5.5 million st facility in August 2012.
...
2013 EXPORT OUTLOOK
Exports were strong in 2012 but this year, it's "not quite competitive," said Beyer. "The netbacks today into China and India are not there, so we saw a drop-off in the fourth quarter," he said.
He added that Illinois Basin coal seems competitive into Europe, but that with the sulfur discount, the netback is actually not competitive. "But as those markets improve, [we] will see IB participate more in the market," he said.
US coal exports are likely to remain flat in 2013 compared with 2012 but are likely to grow in 2014 and beyond, said J. Christopher Haberlin, vice president of research for Davenport & Co.
Haberlin, like Eaves, said new export terminals in the Pacific Northwest would be a "game changer" that would likely boost US coal exports past 200 million tons annually.

--Andrew Moore, andrew_moore@platts.com 

--Edited by Lisa Miller, lisa_miller@platts.com 

Indonesia drops plan to lift coal prices by restricting exports

Indonesia is abandoning a proposal to boost the lowest coal prices since 2010 by banning exports of lower quality grades. 

The world’s largest exporter of thermal coal had drafted a decree to prohibit overseas sales starting in 2014 of coal with a heating value of less than 5,700 kilocalories a kilogram on an air dried basis according to a copy of the proposal on the ministry’s website. Miners would have been forced to upgrade the heating value of the fuel if they wanted to ship it.

He said that “About 93% of the country’s coal reserves an estimated 28 billion tonne in 2011 are below top quality.”

Source - Bloomberg

Coal stocks held by 6 major China power generators down 6% on week
Huaihua, Hunan (Platts)

Combined coal stocks held by six major power generation companies, based in eastern and southern China, averaged 14.269 million mt/d in the week ended Tuesday, down 6% from the previous week, Qinhuangdao Port said in a weekly report on Thursday.
The stocks held by the six utilities -- Zhejiang Power, Shanghai Power, Guangdong Power (Yudean), Guodian, Datang and Huaneng -- will be able to last for an average 20.8 days of consumption, up 0.3 days week on week, according to the report.

--Reggie Le, newsdesk@platts.com
--Edited by Deepa Vijiyasingam, deepa_vijiyasingam@platts.com

Surplus supply keeps coal price in a low ebb

China Daily!

The price of coal is likely to remain bearish this year because of surplus production and the probable further decline of power production, the former head of the National Energy Administration said on Saturday.
China's industrial production, including in energy sectors, has had a sufficient supply of coal and power in recent years, and 2013 will be similar, said Zhang Guobao, the former director of the administration.

weitian@chinadaily.com.cn

Mongolia to Cancel China Coal-Supply Contract, Delay IPO

WSJ

Mostly about coking coal

Mongolia's government is planning to cancel a $250 million coal-supply deal with Aluminum Corp. of China Ltd. that it deems to be undervalued, a move that may deepen distrust between the Mongolia and its neighbor.
Meanwhile, the government is deferring an oft-postponed initial public offering for its state-owned Tavan Tolgoi coal project, a Mongolian government official said Thursday.

...Mongolia, which has huge and as yet lightly exploited mineral reserves, has been a prime beneficiary of a mining boom in recent years, but resource nationalism and a decline in the commodities market have thrown its future into uncertainty.

...Erdenes-Tavan Tolgoi has been seeking to raise as much as $3 billion via a public share offering that has been repeatedly delayed.
The IPO likely won't proceed this year, according to the most recent plan, the official said. Erdenes-Tavan Tolgoi officials couldn't be reached for comment.

Write to Chuin-Wei Yap at chuin-wei.yap@dowjones.com

China's coal imports in 2012 rise 58% on year to 289 million mt
Platt's 2012 YE numbers for China

China imported 289 million mt of coal in 2012, up 57.9% year on year, a compilation of the monthly China customs data released on Tuesday showed.

Of the total imports, thermal coal comprised 35.14%, coking coal 18.55%, anthracite 11.93%, lignite 18.59% and the rest was classified as "others," the compilation showed.

For the month of December 2012, China imported 12.98 million mt of thermal coal, up 62.25% from the 8 million mt imported in December 2011, data showed.

Most of the coal imported came from Indonesia (33.05%). Next was Australia (38.18%), South Africa (12.4%), Russia (6.58%), Mongolia (2.1%), Canada (0.92%), Colombia (2.45%), the US (4.24%) and others (0.08%).

Lignite imports last year mainly originated from Indonesia (93.27%), the Philippines (4.9%) and others (1.83%).
Chinese coal imports with a calorific value of 4,000 kcal/kg NAR are considered lignite, an industry source said.

--Cecilia Quiambao, Cecilia_quiambao@platts.com
--Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

After The Gold Rush: A Perspective on Future U.S. Natural Gas Supply and Price
Pouring cold water on shale gas enthusiasm . . . this is a year old

Central and Southwest China: The Key Battleground for Shale Gas and New Low-Cost Coal Supplies from Xinjiang, Mongolia, and Wyoming 
Pouring cold water on shale gas enthusiasm (China mix). From China SignPost. 

Also this a reminder that Xinjiang has massive potential for surface mining of thermal coal -- it is like the Powder River Basin X 2. And don't forget Mongolia!

2013年电煤合同量创七年新高


今年铁路基建投资将超6000亿


煤炭进口激增 是喜是忧？

Siberian coal miner sees advantage in distance

Reuters reported that coal miner Kolmar, controlled by the billionaire founder of trader Mr Gunvor will plow money into its east Siberian coal fields to capture the Asian steel making market ahead of its Russian rivals farther west.

China Clean-Air Bid Faces Resistance WSJ

Neptune Terminals plans to double coal export Coal Guru Canada supply

Coal Train: The people and process behind Bellingham's coal port decision

Tom Albanese: another mining chief bites the dust as sector negotiates different era
UAF graduate, Tom Albanese, kicked out at Rio Tinto for $14 BN in writedowns (this year). Also leaving are the CFO and the head of Strategery. The owners were begging for mercy after two acquisitions for $40BN that are now worth $10BN - - - and incompetent due diligence in Mozambique. It turns out the coal was somewhere else and they couldn't transport it out when it came time to actually do some bidness - in 18 months the value dropped from $3BN to $1BN. Since Rio is not an American company Albanese will walk away with egg on his face and a measly few million in severance instead of the standard $50 million + package to be earned by wasting billions at an American company.

RIP Seaborne Coal

Blog

Nemo: HK - based macro trader who deals trades in commodities

So assuming China “rebalances” and doesn’t continue with 45% of GDP coming from investment directed into heavy industry that is power intensive like aluminum, the party is definitely over for the coal sector. At the very best its no growth for companies that export coal to China. The problem is that even that outcome is too bullish by a significant margin because China is producing vastly more coal domestically and is rapidly building out the rail infrastructure to move it from mines in Inner Mongolia and Shanxi to coastal areas. Bernstein in particular has been pretty clued into this and it isn’t hard to see why China would do this: Mongolian met coal prices are roughly half of the seaborne market as per this dispute about the Erdenes TT mine shows. Thermal coal prices out of Mongolia are similarly cheap and as a landlocked country Mongolia does not have a lot of pricing power. So when you do the coal market balance you seaborne imports dropping off fairly quickly from 2H 2013 onwards and that is assuming China grows at around 7.5% pa.

He doesn't mention the thermal coal reserves in Xinjiang, but all the more reason to think his onto something . . .

More China Demand Won't Stoke U.S. Coal

BARRONS

Credit Suisse says increased supply from Australia will cap price upside (this is referring to MET COAL).

However we do think it is worth noting that in this month's channel checks, our China Metals and Mining team has seen some signs for a thermal-coal price recovery in the coming months, driven by lower inventories and improving demand. We believe if we do see an uptick in global thermal-coal prices (API2 [delivered price to northwest Europe] currently sub $90 per metric ton), this could lead to improved sentiment for the group, with Peabody the most direct play.

Record China imports unlikely to excite coal market

Reuters

Clyde Russell: Clyde Russell is a Reuters market analyst.

The real difference between coal and iron ore is the outlook for supply, with iron ore still potentially slightly constrained, especially if Indian exports remain depressed due to a crackdown on illegal mining and rising domestic consumption.
Coal supply stands to exceed demand for a second year in 2013, with Barclays estimating an additional 32 million tonnes will be available this year.
However, if China's appetite for imported coal grows at the same rate in 2013 as it did last year, this implies an additional 65 million tonnes.
Even a slackening to half of 2012's pace would still see China absorb the entire available additional coal.
...
It's also probably the case that China's appetite for imports is because prices are low, making imported coal competitive with domestic supplies.

Coal and electricity firms sign coal deals

Beijing Business Today reported that China's coal and electricity companies signed deals for a total of 1.87 billion metric tonnes of coal for 2013, an increase of 55.8% YoY.
Analysts said the surge is due to the liberalization of the coal and electricity prices. Uncertain about the future price of coal, electricity companies are willing to purchase more coal. Coal producers are also willing to sell more coal as they are faced with rising stocks of the commodity.
In December, China's State Council decided to liberalize the prices of coal supplied to power plants in 2013.
Most power generated in China comes from coal-fired plants, which makes power producers heavily exposed to the prices of the commodity. In order to keep electricity tariffs stable, the government has asked coal suppliers for years to sell to power firms at contracted prices, which are far below market rates.

Source - Beijing Business Today

Dry bulk panamax market heavily oversupplied and unlikely to find support in 2013

Despite positive indication for a significant surge of dry bulk demand this year, the oversupply problems of the market, will continue to weigh heavily in terms of freight rates.
The BDI was up by 9 points to 743, with Panamaxes posting an increase of 35 points to 717, which was enough to push the market higher, as all other subsectors were mostly unchanged.
According to a recent note from analysts Commodore Research & Consultancy, "Chinese demand for imported thermal coal has started the week at an extremely robust level and is poised to stay strong during the remainder of this week. 8 vessels were chartered to haul thermal coal cargoes to China on Monday. This was a huge amount for a single day's worth of chartering activity.
During times of moderate demand, an average of 3 vessels is normally chartered to haul thermal coal cargoes to China each day. Demand is poised to stay robust throughout this week and into next week due to low Chinese coal port stockpiles and intensifying winter electricity demand. Coal stockpiles at Qinhuangdao have fallen to 6.1 million tonne. This is well below the crucial 7mt level that official strive to maintain at all Coal stockpiles at Qinhuangdao times.
According to Commodore, panamax rates aren't expected to find significant support in the near term.
It concludes that "We continue to anticipate that new building deliveries will be very high this month. Dry bulk fleet growth traditionally surges every January, as owners normally delay a large amount of December deliveries to be delivered one month later in January. Delaying December deliveries allow owners to receive vessels that will be viewed as being a year younger.”

Source - www.hellenicshippingnews.com


China's coal imports hit record high

China's coal imports jumped to a record of nearly 30 million tonnes in December, driving full-year imports to a high of over 230 million tonnes, as buyers flocked to cheap overseas supplies as they restock. Shipments surged to 29.0 million tonnes in December, up 36.6 percent from year ago and marking the third consecutive monthly rise as traders boosted steam coal supplies over the winter and as steel mills with low inventory stepped up coking coal purchases on a brighter economic outlook.

Total coal imports for 2012 hit 234.3 million tonnes, jumping 28.7 percent from a year earlier, official customs data showed on Monday. Indonesia again took the top spot as the largest supplier to China in 2012. Shipments for the year from Russia and Colombia nearly doubled from 2011, while imports from the United States, Canada and Australia all jumped over 80 percent.
"Weaker regional prices in early November has seen the arbitrage for imported coal re-emerge, so that brought more Chinese traders to the market," said a Shanghai-based coal trader. "The jump in coking coal imports was also helped by restocking activities by steel mills. Considering the fall in coal stocks at utilities and harsh weather in December, imports will likely stay robust in January."

Combined coal stocks held by China's six power generation companies in eastern and southern China stood at 14.65 million tonnes in the week to January 17th. The stocks represent around 20.5 days of consumption, compared to an average 22 days in late December.

The harshest winter in three decades has boosted thermal coal consumption, with the utilities having consumed a combined 5.012 million tonnes of coal last week, up 2.0 percent from the preceding week. Coking coal imports stood at 7.58 million tonnes in December, up 51.4 percent year on year and bringing full year imports to 53.6 million tonnes. Total exports for the year fell nearly a quarter from year ago to 14.7 million tonnes.

China to Boost Coal-Rail Capacity After Delays, Bernstein Says

Bloomberg News on January 15, 2013
Sarah Chen in Beijing at schen514@bloomberg.net

China will add 18 percent more coal- transporting rail capacity this year than initially forecast, piling downward pressure on the price of the fuel, according to Sanford C. Bernstein & Co.

The world’s top producer and consumer of coal will commission 2,950 kilometers (1,833 miles) of such rail lines after startup delays in 2012, caused by funding pullback following a fatal high-speed train crash in 2011, Bernstein said in an e-mailed note today. The broker had forecast 2,498 kilometers, according to the report.

Benchmark spot prices in China fell 20 percent last year as an economic slowdown damped demand for the power-station fuel, according to data from China Coal Transport and Distribution Association. Costs will decline 7 percent this year and continue to slide through 2015, Bernstein said in a report Jan. 14

“As delayed projects are commissioned in 2013, paths to market will expand and pressure on coal price will persist,” Michael Parker, a Hong Kong-based analyst at Bernstein, said in the report. “Rail capacity growth is a core aspect of our bearishness on the Chinese coal sector.”

The next track to be commissioned is a 98-kilometer link from north Chongqing to Fuling, expected to start operations in June, Bernstein said. Another 8,016 kilometers of railway will come online over the following 18 months, with new lines opening once every two to three months, it said.

Coal-dedicated lines commissioned last year totaled 179 kilometers, down 88 percent from 2011, according to Bernstein.

Seven major rail projects that link to ports in the northeastern Bohai Bay will be completed by 2015, with the Handan-Huanghua line to be finished this year, Bernstein said.

China’s power demand rose 5.5 percent to 4.96 trillion kilowatt-hours in 2012, after an 11.7 percent increase in 2011, the National Energy Administration said on Jan. 14.

Reduce greenhouse gas by exporting coal? Yes, says Stanford economistMARK GOLDEN

Western U.S. coal companies looking to expand sales to China will likely succeed, according to Stanford University economist Frank Wolak. But, due to energy market dynamics in the United States, those coal exports are likely to reduce global emissions of greenhouse gases.

If Pacific Coast states construct sufficient coal export facilities, the United States is likely to sell heaps of coal to Asia in the years ahead, but that should cut – not raise – global emissions of greenhouse gases, according to Frank Wolak, professor of economics at Stanford University.

Beijing's 'Airpocalypse' Spurs Pollution Controls, Public Pressure

NPR

Louisa Lim

In China's capital, they're calling it the "airpocalypse," with air pollution that's literally off the charts. The air has been classified as hazardous to human health for a fifth consecutive day, at its worst hitting pollution levels 25 times that considered safe in the U.S. The entire city is blanketed in a thick grey smog that smells of coal and stings the eyes, leading to official warnings to stay inside.

ASIA THERMAL COAL: Term deals find favor with Chinese consumers
Platts
Reggie Le

Chinese end-users have switched to concluding term contract deals and lessened their spot buying with the approach of China's Lunar New Year festivities in mid-February, as spot prices for south China stayed rangebound in Thursday's trading session in Asia at $85/mt CFR basis 5,500 kcal/kg NAR, said market sources.

China Coal Imports to Fall With Domestic Prices, Bernstein Says

Bloomberg
Chua Baizhen

China will cut coal imports this year as the cost of domestic supplies declines, Sanford C. Bernstein & Co. said in a report.

Net purchases from overseas will drop 47 percent to 150 million metric tons this year from 281 million in 2012, Bernstein said in the e-mailed note today. Average domestic benchmark prices will fall 7 percent, it said.

China, the world’s largest consumer and producer of coal, is undergoing a structural slowdown in power-consumption growth just as the capacity for production and transport of coal increases, according to Bernstein. Domestic prices will slide through 2015, while still being susceptible to “seasonal bumps,” Bernstein said.

“We believe that Chinese coal imports are likely to fall in absolute terms in 2013 as lower-priced domestic supply pushes out imports,” Michael Parker, a Hong Kong-based analyst at Bernstein, said in the report. “Over that entire time, we expect coal prices to trend downward. There is plenty of supply available both domestically and from the seaborne market if coal prices creep back up.”

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

China's Coal Imports Climb
Radio Free Asia

An analysis by Michael Lelyveld
2012-12-31

Great summary article

Philip Andrews-Speed, principal fellow in the East Asia program at the National University of Singapore's Energy Studies Institute

Coal accounts for more than half of China's rail tonnage, but bottlenecks in the system have forced more coal onto waterways and crowded roads, the IEA said.
Under the five-year plan, rail transport of coal is expected to reach 2.6 billion tons by 2015. Some 60 percent of the traffic would come from Shanxi and Shaanxi provinces and Inner Mongolia to coastal centers, the northeast and the south.

Despite increases in rail and domestic transport to coastal ports, imports are still expected for eastern and southern provinces including Jilin, Zhejiang and Guangdong, the report indicated.
Wang Zhanjun, head of the coal association, said at an industry meeting in Shanxi on Dec. 22 that imports are set to continue at "high levels" in 2013, Xinhua reported.

Alaska coal exports dip in 2012: company official 
PLATTS

Has Usibelli's 2012 production numbers per Keith Walters. Discusses Chuitna and Wishbone hill as export projects that are in development.

Coal exporters seen adding 15 pct supply by 2014 -Barclays 

Barclay's analyst Trevor Sikorsky (Europe-based) forecasts increase in coal supply exceeding demand. Regarding China and Asia-Pacific he says "Chinese coal imports are expected to stabilise next year before contracting by 35 million tonnes in 2014 to 100 million tonnes" Also, according to article improved transportation infrastructure in China is expected to bolster the use of domestic coal, thereby reducing the need for imports and healthier Chinese hydroelectric reserves should further help temper coal demand.

Coal Three-Year Low Sees Indonesia Rethink China
Bloomberg

Fitri Wulandari | December 27, 2012

Long, multiple excerpts . . .

...
Chinese coal imports will slow next year and shrink in 2014, according to Barclays Plc. Thermal coal purchases by Malaysia, Thailand and the Philippines will rise to 53 million metric tons in 2014, up from an estimated 51 million this year, according to Wood Mackenzie Ltd., which says more than 70 percent of that will be supplied by Indonesia. The nation’s benchmark price slid to a 34-month low of $81.44 a ton in November, data compiled by Bloomberg show.

Indonesia is counting on its neighbors to help consume a planned 10 percent increase in output and reduce its reliance on Chinese buyers who delayed deliveries this year as domestic stockpiles rose to a record. Southeast Asian power stations are expanding and offering alternative destinations for Indonesia’s exports, according to the nation’s coal mining association.

“Indonesian producers had too much of their coal going into China and have learned a good lesson about the risk of over-relying on the Chinese market,” said Bart Lucarelli, the Bangkok-based managing director of Roleva Energy, a consultant whose clients have included Thailand’s energy ministry. “When market conditions weakened earlier this year, Chinese coal buyers forced Indonesian suppliers to reduce their contracted coal prices by very large amounts.”
...
Record Stockpiles
Coal stockpiles at China’s largest power utilities climbed to a record 94 million tons as of Oct. 19 as slowing economic growth weakened demand for electricity generation, according to the China Coal Transport and Distribution Association. The nation’s economy grew 7.4 percent in the three months ended September, the weakest pace in more than three years, while power output that month fell to the lowest level since May, data from the Beijing-based National Bureau of Statistics show.

Growth in China’s seaborne imports of thermal coal is likely to slow to 2 percent in 2013 compared with 39 percent this year, Barclays Plc predicted in a Dec. 21 report. Shipments will be 145 million tons, compared with 142 million in 2012, then drop to 110 million in 2014 as improved transport links make it easier for the nation to use domestically produced coal, the bank said.

Indonesia plans to produce 366 million tons of the fuel in 2013, up from an estimated 332 million this year, the country’s energy and mineral resources ministry said Oct. 8. Exports may be 292 million tons, compared with 265 million in 2012, the data show.
...
‘Heavyweight’ China
Southeast Asia won’t eclipse China anytime soon, according to Kiah Wei Giam, a Singapore-based analyst at Wood Mackenzie, a UK-based consultant to mining and energy companies. The country, which burns coal for about three-quarters of its electricity output, will boost power consumption 6.5 percent in 2013, the Chinese-language 21st Century Business Herald reported Dec. 6, citing an unidentified official at the National Energy Administration in Beijing.

The nation was the biggest buyer of Indonesian coal in 2011, accounting for 25 percent of shipments of 258 million tons, according to data from Indonesia’s energy and mineral resources ministry. Indonesia is also China’s biggest supplier of thermal coal, providing 57 million tons, or 36 percent, of imports in the first 11 months of this year, data compiled by Bloomberg Industries show.
...
‘Dependable’ BuyersIndonesian producers are shifting their focus to smaller markets in Southeast Asia where customers are considered more reliable, said Supriatna Suhala, the Jakarta-based executive director of the Indonesian Coal Mining Association.

“The Southeast Asian market has high-quality and dependable buyers,” Suhala said. “They’re not after cheaper prices as is the case with some other buyers. They prefer to sign deals with suppliers who can ship on time and deliver good- quality coal.”
Malaysia: imports may reach 29.7 million tons in five years, up 29 percent from this year, and 40 million by 2020 as new power plants start, TNB Fuel Services, a unit of the state utility, Tenaga Nasional Bhd, said in Bali last month. The proportion of lower-quality sub-bituminous coal, the grade typically produced by Indonesia, will increase to 65 percent by 2020 from 45 percent now, Mohamad Shaiful Bahri Hussain, the managing director of TNB Fuel, said at the meeting of buyers and producers.

Vietnam may import 10 million tons of coal by 2015, rising to 60 million by 2020, the Tuoi Tre newspaper reported Jan. 11, citing the Vietnam National Coal-Mineral Industries Group. Vietnam Electricity has started building a 28.5 trillion-dong ($1.4 billion) coal-fired power station in the Mekong Delta province of Tra Vinh as the nation seeks to reduce reliance on hydro power, the government said Dec. 8.

...“We expect Southeast Asian demand to continue inching upward during 2013 and 2014,” Karim Awad, the Bangkok-based head of corporate-finance transactions at AWR Lloyd, an energy and mining adviser, said in an e-mail on Dec. 7. “While it will be difficult to side-step Chinese buyers, suppliers are conscious of managing counterparty risk, recognizing the benefits from customer diversification where possible.”

— With assistance from Widya Utami in Jakarta and Jing Yang in Shanghai

China to end govt intervention in thermal coal market
Reuters
Fayen Wong

Dec 21 (Reuters) - China, the world's top coal importer, said it would scrap a regulation to cap spot thermal coal prices and would no longer intervene in annual coal price negotiations between sellers and utilities starting in 2013.

China's coal market has stabilised, and the sector no longer needs such rules, the National Development and Reform Commission (NDRC) said in a statement on its website on Friday, adding that the move was aimed at reforming the coal industry.

Coal price contracts currently are signed every year at an annual meeting organised by the NDRC and the industry association. Coal suppliers have to sell certain quantities to power companies at prices set far below market rates.

Under this system, power companies have managed to buy around half their annual coal consumption at preferential rates.

Contract prices for 2012 were set at around 599 yuan ($96.14) per tonne, and the government introduced a price ceiling on spot coal prices in late 2011 of 800 yuan ($130).
In the international market, Australia's Newcastle spot thermal coal index has fallen around 30 percent this year to about $84 this week.

Coal producer sources said they would continue to ink long-term contracts with power companies but that, instead of a headline price for the whole year, the terms would be adjusted on a more regular basis to better reflect market conditions.

The end of government intervention is not bad news for power companies such as Huaneng Power International and Datang Power , analysts have said, given that China's coal market is likely to be well supplied over the next few years.

Coal producers said they have had preliminary talks with buyers on volumes for the 2013 term contracts. Some said the volumes would be largely unchanged and that they want to guarantee sales, since the market could again be oversupplied next year.

Traders said the timing of the government's decision suggests Beijing is no longer worried about coal shortages at home, which led to severe price spikes in 2008 and late 2010.

"Production growth has risen over the past few years, but demand growth has slowed. Imports have also risen sharply, and that can easily fill any temporary shortage that might emerge in the future," said a Beijing-based trader.

China's coal imports in the first 11 months of 2012 have jumped nearly 30 percent to 205.5 million tonnes.

Analysts said China's coal imports are expected to rise further in 2013 on the back of weak overseas demand and low international coal prices. ($1 = 6.2302 Chinese yuan) (Editing by Ron Popeski and Jane Baird)

Executive Summary (Chinese/English) of the 1st China  Energy Outlook (中国能源展望)
Energy Research Institute (ERI) of the National Development and Reform Commission (NDRC)
aka (国家发展和改革委员会能源研究所)

One key recommendation relating to coal imports is Recommendation 2 - which is a recommendation that China move away from its insistence upon being self-sufficient in coal.

Recommendation is that China should increase coal imports to increase balance of supply and demand from East Coast and SE with the Western part of country. Under this scenario, authors estimate a potential incremental increase in coal imports of 430MM tonnes (300MM in SE, ie, Guangzhou). This would be under a scenario where coal is kept in the West for use in regional development (huge oversimplification in paraphrasing by me).

China’s Coal Imports Poised to Jump as Coke Export Tax Scrapped (COKING COAL IMPORTS)Bloomberg

Helen Yuan  hyuan@bloomberg.net
Editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

The “silent” removal of a 40 percent tax on China’s coke exports, coming after the World Trade Organization ruled against the practice, will drive up production and boost the nation’s coal imports, analysts said.

Exports of coke, used to make steel in blast furnaces, will jump next year, leading to more demand for the coal used to make the product in coking ovens in China, UOB Kay-Hian Ltd. analyst Helen Lau and researcher Custeel.com’s Mu Wenxin said.

China’s coke exports plunged to about 1 million metric tons this year amid the curbs, from an annual average of 15 million tons between 2000 and 2007. Should exports rebound to that average, demand for coking coal may rise by 20 million tons, benefiting suppliers including Mongolian Mining Corp. (975) and Winsway Coking Coal Holding Ltd. (1733), Lau said.
China didn’t include coke on the official list of export taxes for next year announced this week by the Ministry of Finance.

. . .  The price of coke shipped from China’s Tianjin port may drop to $285 a ton from the current $401, making it affordable for Japanese users, Lau estimated.

CN lands export coal contract

Progressive Railroading

Coalspur Mines Ltd. and CN reached an agreement on a seven-year coal transportation contract for the planned Vista project in Alberta, which has the potential to become one of North America's largest export thermal coal mines. The pact is expected to be executed in first-quarter 2013.

.....Coalspur President and Chief Executive Officer Gill Winckler.

... CN plans on supplying equipment to move Coalspur's coal to West Coast terminals. Coalspur has secured a port allocation agreement with Ridley Terminals Inc. at the Port of Prince Rupert, British Columbia, to export thermal coal from the Vista mine to Asia Pacific Rim countries, including China, Japan and Korea.

Australian Newcastle coal exports surge 19% on week in year-end rush

Platts

Coal Heads for a Comeback
BARRONS

RHIANNON HOYLE

The fuel should benefit from the rising price of natural gas, plus China's huge appetite for energy.

Wood Mackenzie expects China to buy 241 million metric tons of thermal coal from the seaborne, or export, market next year, rising to 267 million in 2014. That compares with 224 million tons this year.

Already there's been a slight uptick in the world thermal-coal market. Since the end of October, benchmark prices have risen around 10%. Widely watched thermal coal from South Africa's Richards Bay trades around $88 a ton.

-------------------------------------------------------

Whitehaven Coal eyes China deal
Sky News

Whitehaven Coal has held talks with China's largest coal company, Shenhua Group, about a deal that could help it get embattled entrepreneur Nathan Tinkler off its share register.

Whitehaven confirmed on Wednesday that it had spoken to Shenhua, in discussions believed to revolve around the Chinese group selling its NSW Watermark coal assets in exchange for equity, or alternatively acquiring Whitehaven.

Key Words:
Patersons Securities analyst Matthew Trivett
Whitehaven
Tinkler
Shenhua

-------------------------------------------------------

Coal May Pass Oil As World's No. 1 Energy Source By 2017, Study Says
NPR
Bill Chappell

Despite a slowdown in U.S. consumption, coal is poised to replace oil as the world's top energy source — possibly in the next five years, according to the International Energy Agency. The rise will be driven almost entirely by new energy demands in China and India, the IEA says.

"This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined," says IEA Executive Director Maria van der Hoeven. 

Together, China and India will account for more than 90 percent of the rise in demand for coal over the next five years, according to the IEA.

-------------------------------------------------------

Indonesia Thermal Coal Swaps Climb a Fourth Day; China Unchanged

Bloomberg
Fitri Wulandari

The swap for Indonesian sub-bituminous coal with a calorific value of 4,900 kilocalories a kilogram in the first quarter of 2013 rose 35 cents to $63.55 a metric ton on a net- as-received basis yesterday, Ginga said in an e-mail today. The January contract also climbed 35 cents to $63.55 a ton.

Contracts for coal with a heating value of 5,500 kilocalories a kilogram for shipment to SouthChina in the first quarter remained at $84 a ton on a net-as-received basis, the energy broker said. The swap for January held at $83.65.

进口煤优势重现 煤炭进口商豪赌套利2012年12月14日
来源:21世纪经济报道

Story starts with Gao Hong (nervous 忐忑 tante (34)) - he just signed a big contract that involved 20 million loan to buy up a mine's entire output. He has bet the entire company on what happens to prices next year

观望市场 - waiting on the market sidelines
But, other buyers are not signing contracts to import coal because they are waiting for the prices to come down. Right now the quoted prices are too high. One such guy is VP Shen Zhaozhou - he is looking for Africa or Indonesia 5500KCal coal - the 628 RMB price he just got quoted is too high. He thinks that demand in South China and along the coast will increase and that supplies are sufficient, but that if the economy doesn't recovery then life is going to get difficult (中间贸易商的日子肯定不好过)

价格优势重现 - the reappearance of price advantage

Prices in May had 160RMB spread between Australia and Qinhuangdao CIF. For 5500Kcal coal, at 20-30 RMB price difference between guonei and guowai is enough to set users about importing again. Especially power producers who will buy cheaper imported coal and go so far as break orders/ contracts. The last 3 years large users (power plants and steelworks) have gotten usedto importing and if a price discrepancy reappears, they will import more.

This presents a challenge to domestic coal producers and their current set prices won't work;as soon as they go up a little the buyers will import. Coastal power producers are still have a high leve. of enthusiastic about importing coal

At the same time there is information arising that domestic producing regions prices are going to be adjusted upwards. 电煤价格并轨对进口煤市场短期内影响不大。而长期来看，取消了重点电煤之后，进口煤的区位优势和价格优势可能会进一步显现，进口煤的竞争力相对会有所增强。

他解释，由于取消了重点电煤，国内用煤企业对国际市场的关注可能也会增加，未来单独的进口贸易越来越难做，必须要和国外的矿商和国内的终端用户联合起来，才能有效降低风险。

Quotes an analyst name Li Yan who thinks that import markets are going to become more important - more important for large users who will focus more on these markets that will become more competitive. Independently importing will become harder and it will be more important to work with overseas mines and domestic end-users to limit risk.


Special words:
到岸价 - daoanjia (CIF)
李延 - Li Yan coal analyst 中商流通生产力促进中心分析 (DPPC Distribution Promotion and Producitivity Center)
浙江启新煤电集团 - 副总经理 - 沈兆洲 - Shen Zhao Zhou - VP of Zhejiang XXXX
国家能源主管部门 -
按兵不动 = anbingbudong - hold back the troops (wait and see)
套利 - taoli(44) arbitrage

ASIA THERMAL COAL: Low Chinese buying weighs on Newcastle, Indonesian prices

PLATTS
Deepak Kannan, deepak_kannan@platts.com; Stephanie Wilson, stephanie_wilson@platts.com; Reggie Le, newsdesk@platts.com
Edited by Jeremy Lovell, jeremy_lovell@platts.com

"He said last week three Capesize cargoes of Newcastle 5,500 kcal/kg NAR coal were reportedly traded at $75/mt FOB into South Korea, which is willing to pay higher prices than China . . . 

"Combined coal stocks at China's four major Bohai Sea ports stood at 17.189 million mt Sunday, up 5% week-on-week and rising for the seventh week in a row, Qinhuangdao Port data released Monday showed . . . 

"Very few cargoes had been traded out of Indonesia into China so far, according to the source, who said there was still a $4-5/mt gap between bids and offers . . .  

"Platts also assessed the daily price of FOB Kalimantan 4,200 kcal/kg GAR coal for loading in the next 7-45 days at $38.60/mt, unchanged from Monday.

Coal freight rates from Qinhuangdao to South China ports fall slightly

PLATTS
Reggie Le, newsdesk@platts.com
Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

"For vessels with the capacity to carry 20,000-30,000 mt, the freight rate from Qinhuangdao to Zhangjiagang fell to an average of Yuan 32.60/mt ($5.22/mt), down Yuan 0.60/mt week on week, data from the report showed.
For vessels with 40,000-50,000 mt of capacity, the freight rate from Qinhuangdao to Shanghai fell Yuan 0.40/mt week on week to an average of Yuan 26.0/mt.
However, the freight rate for 50,000-60,000 mt capacity vessels transporting coal from Qinhuangdao to Guangzhou edged up Yuan 0.30/mt week on week to Yuan 37.10/mt.

Meanwhile, coal stocks at Qinhuangdao Port stood at 6.62 million mt Wednesday, similar to a week ago, port figures showed. Qinhuangdao Port had 6.78 million mt of coal on December 2, 6.56 million mt on November 25, 6.53 million mt of coal on November 18, 6.07 million mt on November 11, and 5.82 million mt on November 4, Platts has reported previously."

Coal Prices to Stay Low Until China Inventories Fall

For Mongolia, China's too close for comfort

Bloomberg
Charles Hutzler

After years of testy debate, Mongolia broke ground this spring for a railroad that will haul coal across the pebbled Gobi desert to China, but with one costly condition.
Citing national security, the government ordered the rails be laid 1,520 millimeters apart, Mongolia's standard gauge inherited from the Soviets. The width ensures that the rails cannot connect to China's, which are 85 millimeters (about 3 1/2 inches) closer together. So at the border, either the train undercarriages will need to be changed or the coal transferred to trucks, adding costs in delivering the fuel to Mongolia's biggest customer.

In case you were wondering what Qinhuangdao looks like from the air

 
View Larger Map

USTDA AND U.S. DOT SUPPORT THE DEVELOPMENT OF CHINA'S RAILWAYS AND PORTS

The first activity is a technical workshop focused on heavy haul rail development in China. The workshop will be led by DOT's Federal Railroad Administration, in coordination with the Chinese Ministry of Rail (MOR) and the American Rail Working Group, an organization composed of more than 25 companies. Railway transportation plays a key role in China's economic development. Following the rapid development of its passenger rail network, MOR is now making plans for more heavy haul rail in order to improve cargo shipping efficiency and lower operation costs. The United States has the largest heavy haul railroad network in the world, and experienced U.S. firms have cutting-edge technology and products that can assist China in achieving its transportation goals. The Heavy Haul Rail Technical Workshop will mobilize U.S. expertise and resources to foster greater cooperation among private sector entities, government agencies, and industry representatives in both the United States and China.

大秦铁路增量补欠 煤炭压港难以再现

Daqin Railway incremental shipment

The Daqin Railway is moving as much coal as it can even though downstream demand is weak and reserves are at a high level. Is this going to lead to port and generator coal piles to reach capacity? The writer ( doesn't think so.

At the end of October, Taiyuan railroad offices held a meeting and create a plan to increase shipments  1.32 million tonnes / day for the next 60 days. This is an increase from 60 to 65 20 tonnes trains per day. From Dec. 1 -3, the Daqin line moved 1.3 million tonnes per day (average) and increase of 11 tonnes per day or 33 tonnes over the three days. From Dec. 3-6 moved 1.317 million tonnes per day. According to the railroad plan, 37, 20 tonne trains for Qinhuangdao, 3 15 tonne trains, Tangshan 7 15 tonne trains; Guotoujingtan port 10, 20 tonne trains; Caofeidian port 12 20 tonne trains.

October YTD Daqin line moved 348.35  million tonnes of coal; 15.49 million tonnes less than same period last year. 84% of this went to Qinhuangdao and Tangshan (Hebei); the remaining 16% went to Duanjialing, Gaogezhuang, Jixian West Port (Tianjin), Northwest (Dongbei) and into Daqin RR's own lines.


1.1.经济持续、稳步发展，需求保持一定水平
According to media, in October entire society used 399.8 BN KWH of electricity. Total electricity demand for October grew 6.05% vs last Oct, which is 3% faster than September; changed this year's condition of persistently falling behind. Total industrial  295.7 BN KWH of electricty - 5.89% more than same period last year - the fastest increase this year. Out of this, heavy industry used 245.1 BN KWH 5.81% more than last year this is 5.9 percentage points faster than last month's increase. Light industry electrical consumption increase 6.2%; increase started in May.

2.刺激政策会增加煤炭需求
Estimates of new public XXXXXXXXX also policies starting become apparent
Nov and Dec are the winter months, heating season is going to pull on demand; along with the decrease in hydro electricity generation, increase in thermal power,

NRDC in early September began to energetically examine city rail, public roads and transportaiton construction planning projects - local governments also matching them and competitively enlarging the scope of the projects Shanxi Heilongjian Chongqing etc 10 districts in turn announced a combined total exceeding 10TN RMB regional economic stimulus --. Vigorously stimultated steel, cement etc capital construction material demand, raw steel price increased in response and steel production also started to increase. Acc to stats, October steel, nonferrous metals industry production index rose prominently; ferrous metal process industry orders index increased 13.8 percent arriving at 58%. The rapid rebound of cement and steal is causing the demand for coal to recover.

3.煤炭需求增加，港口发运将保持高位
something something - lookking at history the last time there was pressuron the ports was back in the winter of 2008, with the financial crisis, recession and large factories shutting down that coal began to pile up and create pressure.

4.配套港口增多，堆存量能力提高

5.“三西”煤矿没有太大增量。

6.流向沿线京津唐秦沿线电厂的车流保持一定水平