Chinese Coal Supply and Demand Trends for 2011 Coal Supply and Demand Outlook for 2010 Chinese Coal Supply and Demand Trends for 2011 David Fang May 2011 China Coal Transport and Distribution

Chinese Coal Supply and Demand Outlook for 2010

Chinese Coal Supply and Demand Trends for 2011

David Fang

May 2011China Coal Transport and Distribution Association

PDF 文件使用 "pdfFactory Pro" 试用版本创建 ÿ赠æ www.fineprint.cn

http://www.fineprint.cn

Presentation Outline

◆Why is China’s thermal coal supply tight in slack season?◆

◆

Will China’s coal supply continue to be tight in the coming months and 2-3 years?

How will China meet its rising coal demand in 2011 and the future?

PDF 文件使用 "pdfFactory Pro" 试用版本创建腏½ www.fineprint.cn




◆





China’s coal production on a steady rise

Raw coal production rose 8.3 pct YoY to 790 million tons (SAWS) in Q1, with Shanxi province contributing 183.9 million tons, up 15.1 pct YoY, and Inner Mongolia 195.6 million tons, up 19.3 pct YoY.



Coal shipments by rail and sea rising sharply

Coal shipments by rail rose 12.6 pct YoY to 553 million tons in Q1, coal shipments from ports surged 30.5 pct YoY to 156 million tons.



Chinese rail freight of coal for 2005-2011 Q1

1.29 1.381.69 1.75

0.55

1.54

1.99

10.5

1.3

6.8 5.8

14.212 12.6

0

0.5

1

1.5

2

2.5

2005 2006 2007 2008 2009 2010 2011 Q1

billi

on to

ns

0246810121416

%

Volume of rail freight YoY

Source: Ministry of Railway of China

PDF 文件使用 "pdfFactory Pro" 试用版本创建 ÿ www.fineprint.cn


Coal shipments from northern seven ports

0

10

20

30

40

50

60

Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

mill

ion

tons

0

10

20

30

40

50

60

2010 2011 YoY(2010) YoY(2011)

Source: CCTD



Fallng coal stocks at coal mines, power plants and QHD port

Monthly coal stocks at Key state-owned coal mines

05

101520253035

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

mill

ion

tons

-20-15-10-505101520

%

2010 2011 MoM(2010) MoM(2011)

Source: CCTD



Coal stocks at China's major power plants for 2010 & 2011

0

1000

2000

3000

4000

5000

6000

7000


10,0

00 to

ns

2010 2011

Source: CCTD

However, coal stock levels may vary greatly among different provinces. As of May 4, 2011, coal inventories were enough for only 4 days of use in Hunan province. Other provinces with coal stocks at less than 7 days of use include Jilin, Sichuan, Shaanxi and Qinghai.



Coal stocks at QHD port for 2010 - 2011

300400500600700800900

1000

1 5 9 13 17 21 25 29 33 37 41 45 49

10,0

00 to

ns

2010 2011

Source: CCTD



Stronger-than-expected demand tightening domestic thermal coal supply in traditionally slack season

Strongly rebounding heavy industries are boosting electric power consumption after the government has loosened the energy conservation and emission cut campaign.

Electric power consumption rose 12.7 pct in Q1, and 13.41 pct in March. Heavy industries represented around 60 pct of national total power consumption, staged a 12.29 pct YoY growth.



Source: China Electricity Council

National power consumption for 2010-2011 Q1

0

1000

2000

3000

4000

5000


100

GW

kw

h

0

10

20

30

40

50

%

2010 2011 YoY (2010) YoY (2011)



China electricity council

Breakdown of power production for 2011 Q1Unit: 100 GW kwh

1136(YoY 32.9%)

188(YoY 60.4%)

9007(YoY 10.6%)

206(YoY 17.4%)

hydro power thermal power nuclear power wind power




Thermal coal consumption for power production rose 9.9 pct YoY to 322 million tons (NDRC).

Supply tightness is boosting domestic thermal coal prices, leaving the benchmark seaborne price (5500 kcal/kg, NAR) at a two-year high of 805-820 yuan/ton FOB QHD in early May after peaking in 2008. We forecast that seaborne coal prices may not rise more than 10 pct this year as inflation control is the top priority for the government.



Tight coal supply and high coal prices may cause or worsen power shortages in China, most severe in central China and southeastern provinces.

280320360400440480520560600640680720760800840880920960

10001040

Jan.2Jan.14Jan.28Feb.18M

ar.3M

ar.17M

ar.31A

pr.14A

pr.28M

ay.12M

ay.26Jun.9Jun.23Jul.7Jul.21A

ug.4A

ug.18Sep.1Sep.16O

ct.6O

ct.20N

ov.3N

ov.17D

ec.1D

ec.16D

ec.29Jan.12Feb.1Feb.16M

ar.2M

ar.16M

ar.30A

pr.13A

pr.27M

ay.11M


ug.3A

ug.17A

ug.31Sep.14Sep.27O

ct.19N

ov.2N

ov.16N

ov.30D

ec.14D

ec.28Jan.11Jan.25Feb.8M

ar.1M

ar.15M

ar.29A

pr.12A

pr.26M

ay.10M


ug.2A

ug.16A

ug.31Sep.13Sep.27O

ct.11O

ct.25N

ov.8N

ov.22D

ec.6D

ec.20Jan.3Jan.17Feb.9Feb.21M

ar.7M

ar.21A

pr.2A

pr.18M

ay.2

FOB Price(5500 kcal/kg)

FOB Price(5000 kcal/kg)

Domestic steam coal prices FOB QHD (2008 - 2011)

yuan/tons

Source: CCTD





◆





China’s coal supply is mostly constrained by intensified nation-wide coal mine consolidation campaign and rail infrastructure bottlenecks.

The new round of mine consolidation campaign started with two of top four coal-provinces: Shanxi in 2009, Henan in 2010. The campaign is spread to other leading producers this year, including Shaanxi, Inner Mongolia, Heilongjiang, Shandong, Guizhou.



The mine consolidation may disrupt and constrain coal production in China in the 2011-2015. Its impact on coal production and supply can be seen from the cases of Shanxi and Henan.

Shanxi province's coal production and outboundcoal shipments for 2005-2010

13.920.5

2.8 10.22.5 -6.3 15.9

-18.50.8

4.1

17.9 22.3

0

200

400

600

800

2005 2006 2007 2008 2009 2010

mill

ion

tons

-30-20-100102030

productionoutbound coal shipmentsproduction growth (YoY)outbound coal shipments growth (YoY)

Source: CCTD



Coal production in Henan for 2005 to 2010

22.4

-35.3 6.1

12.6

-22.3

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010

mill

ion

tons

-30

-20

-10

0

10

20

30

production YoY

Source: CCTD



The government intends to intensify mine consolidation across the country during 2011-2015, during which coal production is greatly constrained and might grow 7-8 pct on average per year.

China's coal production for 2004-2011 Q1

10.4

8.2

11.1

8.98.2 8.3

7.7

0.5

1

1.5

2

2.5

3

3.5

2005 2006 2007 2008 2009 2010 2011Q1

billi

on to

ns

6

7

8

9

10

11

12

production YoY

Source: CCTD



Source: NBS

China's coking coal production for 2005-2008

0.91 1.030.980.96

5.5

3.4

2.1

5.1

00.20.40.60.8

11.21.4

2005 2006 2007 2008

billi

on to

ns

1

2

3

4

5

6

%

production production growth YoY



The economic restructuring, energy conservation and emission cut may tend to slow down coal demand growth in China, but time frame might be uncertain, while it is certain that rail infrastructure may continue to bottleneck coal transportation in the coming 2-3 years.




Correlation between GDP growth and power consumptiongrowth in China

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 Q1

%

GDP growth YoYnational power consumption growth YoYpower consumption growth YoY in heavy industries



If China’s reliance on energy-intensive industries is not changed greatly, leaving coal demand strong, domestic coal supply may tend to be tight later this year and in the coming 2-3 years when rail infrastructure bottlenecks continue to exist. Coal import might be critical to fill the domestic supply gap.





◆





It is critical to manage the demand side, with constraint of energy-intensive industries, power rationing, power tariff hike in the short term, shift to renewable energy such as hydropower, wind power and nuclear power in the medium and long term.



China may increase coal imports in the coming summer season, we forecast that China’s coal imports may grow moderately in 2011, due to higher overseas prices.



China's coal imports for 2005-2011 Q1

-27

31

211.4

-20.8

34.947.739.1

020406080

100120140160180

2005 2006 2007 2008 2009 2010 2011 Q1

mill

ion

tons

-50

0

50

100

150

200

250

%

imports YoY

Source: China Customs



China has taken a series measures to improve domestic coal supply. The coal mine consolidation campaign is being intensified to make coal production more stable and flexible. Coal resources development is shifting to northwestern China from eastern and central China where coal resources are being depleted.



Coal transportation will be improved by expanding the capacity of existing railways and building new west-to-east railways to connect major coal producing provinces with eastern ports. It is expected that the rail bottlenecks will be basically removed in 2015, when China’s total rail freight of coal may grow 1.0 billions or so from 1.99 billion tons in 2010 to 2.99 billion tons by 2015.





China plans to invest 500 billion yuan in ultra-high-voltage power transmission lines by 2015 to transmit power from the west to the east, from the north to the south by building more mine-mouth power stations.



China's Installed Generating Capacity for 2002-2010

356.6 391.4 442.4517.2

623.7718.2

792.7874.1

962.2

11.7

13

9.8

16.9

20.6

15.2

10.4 10.310.1

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006 2007 2008 2009 2010

mill

ion

KW

0

5

10

15

20

25

%

Generating installed capacity YoY

The Breakdown of Installed Generating Capacity in 2010

thermal power74%

hydro power 22%

nuclear power1%

wind power 3%

thermal power hydropower wind power nuclearpower



China's Installed Coal-Fired Power Generating Capacity for2001-2010

253 265.6

391.4

483.8556.1

602.9652

707

329.5289.8

14.93

23.62

8.48.18.41

18.78

13.7

9.12

4.956.51

0

100

200

300

400

500

600

700

800

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

mill

ion

KW

0

5

10

15

20

25

%

Generating installed capacity YoY





Thank you!



Documents

Chinese Coal Supply and Demand Trends for 2011 Coal Supply and Demand Outlook for 2010 Chinese Coal Supply and Demand Trends for 2011 David Fang May 2011 China Coal Transport and Distribution