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Power rationing and coal prices in China
Feature article
Power restrictions are being put in place in China heading into the peak
summer season, with curbs against heavy industries in some provinces. The
shortage of power looks to be in part due to loss making IPPs cutting output.
Latest news
Base metals edged upwards on Thursday as the market digested mixed
economic data, while silver shot up again to $48.7/oz, up 7.5%. Over the
week as a whole, aluminium again outperformed the base metals suite, being
the only metal to record a WoW rise (up 0.8%).
US GDP increased by 1.8% at a seasonally-adjusted annualised rate (SAAR)
in Q1 2011, which was below consensus market expectations of 2.0%, as
government spending declined at its fastest rate since 1983 (-5.2%
SAAR). However, the contribution of consumer spending growth to the
overall expansion was in line with expectations (1.9% SAAR). We continue to
expect the US economy to expand at an above trend rate over this year as a
whole, supported by accommodative monetary and fiscal policy settings,
which should be positive for commodities demand.
Aquarius Platinum reported Jan-Mar quarter production results, with weaker
production at Kroondal (-7% YoY) and Marikana (-32% YoY) offset by the
ramp up at Everest to boost total PGM production by 10koz YoY in the
quarter. Safety stoppages were highlighted as an issue, which are likely to be
a widespread factor impact South African PGM production this year. Norilsk
also announced its production of PGMs in the quarter, which were stable
relative to last year.
J-Power has announced it is planning to purchase more coal this year
compared to its pre-disaster target of 20mt. Company President Masayoshi
Kitamura commented that coal consumption will increase “maybe by a few
million tonnes” this year as it attempts to make up the loss from nuclear
capacity and other coal fired generation. This helps mitigate some lost
demand, although imports are still likely to be down ~10mt on 2010 levels.
Data on iron ore inventory at 50 smaller steel mills in China continues to
show an ongoing destock. We had expected to see inventory ticking up,
following the buying activity at the start of April that pulled prices from their
slide. However, the fact that prices can push up without inventory rising
indicates yet again just how tight supply is relative to demand. We believe
another round of purchasing activity will be required in the very near future
that will provide further upward momentum for prices. Indeed, The Steel
Index 62%Fe CFR China assessment rose $2/t today to $181.5/t.
The impact of inclement weather on the met coal market is not yet over, with
severe storms in Alabama causing “significant damage” to the preparation
plant and conveyor system at Cliffs 1.4mtpa Oak Grove mine. No timescale
for outage is yet available, however this will add further pressure to the still
undersupplied market for hard coking coal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Power rationing and coal prices in China
Feature article
Power restrictions are being put in place in China heading into the peak
summer season, with curbs against heavy industries in some provinces. The
shortage of power looks to be in part due to loss making IPPs cutting output.
Latest news
Base metals edged upwards on Thursday as the market digested mixed
economic data, while silver shot up again to $48.7/oz, up 7.5%. Over the
week as a whole, aluminium again outperformed the base metals suite, being
the only metal to record a WoW rise (up 0.8%).
US GDP increased by 1.8% at a seasonally-adjusted annualised rate (SAAR)
in Q1 2011, which was below consensus market expectations of 2.0%, as
government spending declined at its fastest rate since 1983 (-5.2%
SAAR). However, the contribution of consumer spending growth to the
overall expansion was in line with expectations (1.9% SAAR). We continue to
expect the US economy to expand at an above trend rate over this year as a
whole, supported by accommodative monetary and fiscal policy settings,
which should be positive for commodities demand.
Aquarius Platinum reported Jan-Mar quarter production results, with weaker
production at Kroondal (-7% YoY) and Marikana (-32% YoY) offset by the
ramp up at Everest to boost total PGM production by 10koz YoY in the
quarter. Safety stoppages were highlighted as an issue, which are likely to be
a widespread factor impact South African PGM production this year. Norilsk
also announced its production of PGMs in the quarter, which were stable
relative to last year.
J-Power has announced it is planning to purchase more coal this year
compared to its pre-disaster target of 20mt. Company President Masayoshi
Kitamura commented that coal consumption will increase “maybe by a few
million tonnes” this year as it attempts to make up the loss from nuclear
capacity and other coal fired generation. This helps mitigate some lost
demand, although imports are still likely to be down ~10mt on 2010 levels.
Data on iron ore inventory at 50 smaller steel mills in China continues to
show an ongoing destock. We had expected to see inventory ticking up,
following the buying activity at the start of April that pulled prices from their
slide. However, the fact that prices can push up without inventory rising
indicates yet again just how tight supply is relative to demand. We believe
another round of purchasing activity will be required in the very near future
that will provide further upward momentum for prices. Indeed, The Steel
Index 62%Fe CFR China assessment rose $2/t today to $181.5/t.
The impact of inclement weather on the met coal market is not yet over, with
severe storms in Alabama causing “significant damage” to the preparation
plant and conveyor system at Cliffs 1.4mtpa Oak Grove mine. No timescale
for outage is yet available, however this will add further pressure to the still
undersupplied market for hard coking coal.
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