Monday, April 29, 2013

Carbon bubble makes Australia's coal industry prepared for financial collapse

Much of the nation's coal reserves will be worthless if world's governments fulfill pledge to cap emissions, warns report

Australia's huge coal industry is a speculative bubble ripe for financial implosion if the world's governments fulfill their agreement to act on climate change, according to a new report. The warning that much of the nation's coal reserves will become worthless as the world hits carbon emission limits comes after banking giant Citi also warned Australian investors that fossil fuel companies could do little to avoid the future loss of value.

Australia is already the globe's biggest coal exporter and "mega-mine" plans in Queensland for more extraction are identified as the world's second biggest "carbon bomb" threatening runaway global warming.

"Investments in Australian coal rest on a speculative bubble of climate denial, indifference or dreaming," said John Connor, one of the new report's authors and CEO of The Climate Institute, an independent research organization based in Sydney. "Investors, governments and even some coal companies say they take climate change seriously, but this report shows they do not or are taking risky gambles."

James Leaton, at ThinkTank Carbon Tracker and also another of the report's authors, said: "Investors need to challenge the assumption that coal demand will continue to rise in China and elsewhere, otherwise billions of dollars of taxpayer, superannuation and shareholder funds will be wasted in assets linked to unburnable carbon."

Carbon Tracker's recent global report found that at least two-thirds of existing fossil fuel reserves will have to remain underground if the world is to meet existing internationally agreed targets to avoid the threshold for "dangerous" climate change. The new report shows Australian coal reserves owned by listed companies alone are equivalent to 25% of the global carbon budget for the fuel to 2050.

However, far from cutting back on exploration for new coal reserves, Australian listed companies spent AU$6bn on developing new deposits. If only half of potential future reserves were exploited, Australian coal would use up 75% of the global carbon budget for the fuel.

Earlier in April, Citi banking group issued a warning to investors in fossil fuel companies. "We see limited potential for engagement to alter the outcome in this case," concluded its report. "If the unburnable carbon [scenario] does occur – even with carbon capture and storage technology – it is difficult to see how the value of fossil fuel reserves can be maintained."

Leaton said China has indicated its coal use will peak in the next five years, but markets had not priced this. "I don't know why the market does not believe China. When it says it is going to do something, it usually does." Yet Australia is banking on selling coal to China: "That doesn't add up."

The report, called "Australia's carbon bubble", also warns that the nation's politicians will have little control over events: "Tokyo and London have high exposure to Australian proven coal reserves. The decisions in overseas markets that will leave Australian assets stranded are beyond any Australian political control."

It also warned that as coal prices fell in future, Australia's high costs of production leave its coal less competitive.

A separate report, also published on Monday, highlighted the opportunities available to Australia in joining other nations with big energy resources in transforming to a low-carbon economy.

"There are a lot of opportunities for Australia but the world is changing quickly and we need to be prepared," said Prof Tim Flannery, of the independent Climate Commission. "We are the 15th largest emitter in the world, larger than 180 other countries. We are more influential than most of us think."

"China is accelerating action. After years of strong growth in coal use, this has begun to level off. They have an impressive array of [climate] actions that will drive global momentum in the future," he said. "Renewable energy is surging globally with solar PV capacity increasing 42% and wind 21% in just one year. With so much global momentum this is clearly the beginning of the clean energy era."

Thursday, April 25, 2013

World Steel Association predicts 5.9% growth in India's steel demand in 2013

World Steel Association has said steel demand is expected to pick up In India by 5.9% to 75.8 million tonne (mt) in 2013 following 2.5 % growth in 2012. The WSA which released its short term outlook for 2013 and 2014 in Brussels on Thursday said in case of India, steel demand is likely to grow due to monetary easing which is is expected to support investment activities. In 2014, growth in steel demand is expected to further accelerate to 7.0% thanks to the reform measures aimed at narrowing the fiscal deficit, coupled with measures to improve the foreign direct investment climate.

WSA said global apparent steel use will increase by 2.9% to 1454 mt in 2013, following a 1.2% growth in 2012. In 2014, it sis forecast that world steel demand will grow further by 3.25 to reach 1500 million tonne.

Hans Jurgen Kerkhoff, Chairman of the worldsteel Economics Committee said: "2012 was a challenging year for the steel industry with apparent steel use increasing at the slowest rate since 2009 when demand declined by -6.5%. This was mainly due to the Eurozone crisiswhich persisted throughout 2012 and whose impact was felt further afield. On top of this, corrective macroeconomic measures in major emerging economies also contributed to a concerted slowdown globally.

"However, in the early part of 2013, the key risks to the global economy - the Eurozone crisis, a hard landing for the Chinese economy, and the US fiscal cliff issue - have all stabilised considerably and we now expect a recovery in global steel demand to kick in by the second half, led by the emerging economies. Yet, the situation on the financial markets remains fragile and the Eurozone crisis is far from being solved as the recent events in Cyprus have again shown. In 2014, we expect a further pickup in global steel demand with the developed economies increasingly contributing to growth."

In 2013, in the US, after growth of 8.4% in 2012 due to the automotive and energy sectors and an increasingly resilient construction recovery, apparent steel use is forecast to grow by 2.7% to 99.3 Mt due to continuing fiscal concerns. In 2014, steel demand is expected to increase by 2.9%, thus exceeding 100 Mt with the help of positive momentum from the construction sector. For NAFTA as a whole, apparent steel use will grow by 2.9% and 3.0% in 2013 and 2014 respectively, WSA said in its outlook.

Steel demand in Japan is expected to decline for the second consecutive year in 2013 by -2.2% to 62.6 Mt due to contracting shipbuilding and automotive sectors despite a positive boost from the construction sector. In 2014, it is expected to contract again by -0.6%. This is due to an end of fiscal stimulus and structural factors, for example, increasing relocation of production by Japanese manufacturers overseas.

Apparent steel use in China is expected to grow by 3.5% in 2013 to 668.8 Mt following a 1.9% increase in 2012. In 2014, steel demand is expected to grow by 2.5% as the Chinese government's measures to control investment in an effort to rebalance the economy will remain in place.

Monday, April 22, 2013

China's Coal import improved in March, but outlook is still foggy

(Reuters) - China's coal imports rose 13.3 percent in March from the month before, customs data showed on Monday, rebounding from two consecutive months of decline as cheaper overseas prices encouraged end-users to step up orders.

China is the world's biggest coal consumer and importer. March imports, excluding lignite, were 20.52 million tonnes, compared with 18.12 million in February. Still, shipments are down nearly nearly a third from a record 29 million tonnes in December.

Total imports in the first quarter rose 27.3 percent from a year ago to 63.8 million tonnes, as a regional supply glut made imported coal cheaper and encouraged utilities to turn to foreign supplies.

Indonesia reclaimed the spot as China's top supplier, selling 6.0 million tonnes in March, a year-on-year rise of nearly 19 percent and up from 5.14 million tonnes in February.

The surge in Indonesian supplies was led by China's increased appetite for low-sulphur sub-bituminous coal, often used for blending purposes, traders said.

Imports from Australia were up 55.7 percent from year ago at 5.65 million tonnes in March.

Despite the rebound in March arrivals, Chinese demand for thermal coal imports has stalled in recent weeks and shipments are set to fall this quarter, producers and traders say, removing the main prop of the Asian market and threatening to cut already weak benchmark Australian coal prices.

A sustained fall in domestic coal prices means that the landed price of imports last week became more expensive than local supplies, reversing a discount of 10-20 yuan a tonne that had lasted for most of February-March, traders said.

Imports of coking coal, used in steelmaking, were up 11.9 percent year-on-year in March at 4.64 million tonnes, bringing total imports in the first quarter to 17.2 million tonnes.

Chinese coal prices for immediate delivery slipped 1 yuan to 615 yuan ($99.46) a tonne last week, according to the benchmark Bohai-Bay Rim index. Coal at the Australian port of Newcastle, a benchmark grade for Asia, stood at $86.64 a tonne on Friday.

Sunday, April 21, 2013

China Coal Falls to Lowest Price in Three Years; Stockpiles Drop

Power-station coal at China’s biggest shipping port for the fuel fell to the lowest price in more than three years. Stockpiles dropped to a five-month low as a railway for delivering the fuel conducts maintenance.

Coal with an energy value of 5,500 kilocalories a kilogram at Qinhuangdao slid to a range of 605 yuan ($97.88) to 615 yuan a ton as of yesterday, the least since Oct. 12, 2009, data from the China Coal Transport and Distribution Association showed today. Inventories declined 15 percent from a week earlier to 5.82 million metric tons, the lowest since November.

The Daqin railway, which links Shanxi province and Qinhuangdao and carries a third of China’s train deliveries of coal, is conducting maintenance from April 13 to May 7. The work affects the transport of 290,000 tons of the fuel a day, according to the association.

China’s coal output in the first quarter dropped 1 percent from a year earlier to 830 million tons as consumption slowed, China Coal News reported April 17, citing the China Coal Industry Association. The country’s coal use in the first three months rose 1.5 percent to 910 million tons, it said.

By Bloomberg News

Friday, April 19, 2013

NWR settles Q2 2013 coking coal price at $136/ MT

Czech coking coal producer New World Resources (NWR) has settled its coking coal sales price for the second quarter of 2013 at €104 ($136) per tonne, it said on Thursday April 18.