China Coal MonthlyThe defi nitive monthly publication on the Chinese coal industry
Domestic Chinese prices set to bottom out in AugustThe ChINeSe COAL market is expected to rebound around late August, with prices stabilising on the back of improved demand and lower hydro output, according to market analysts.
However, before that, sentiment suggest the market will remain weak following continued price cuts by producers. For example, Shenhua reducing prices by a combined RMB55/t ($8.94/t) from June 26-July 28.
Shenhua, the leader who initiated the steep price cuts, is currently selling its 5,500kc NAR material at MB475/t ($77.24/t) FOB, down 10.4% from the RMB530/t ($86.18/t) FOB it was selling at before June 26.
This price equates to just $66/t, exclusive of VAT. Its 5,800kc NAR coal was priced RMB515/t ($83.7/t), while its 5,000kc NAR product now sells at RMB415/t ($67.5/t), after an RMB10/t ($1.6/t) reduction was announced on July 28.
Shenhua said in early July that it had scrapped its earlier indexation scheme set at the beginning of the year and had adopted a lowest-pricing strategy, which essentially means the company would not tolerate other miners selling at prices lower than Shenhua.
At the same time, Shenhua Group said on July 28 that it would cut output by 50mt, and sales by 60mt this year, which will be equivalent to roughly 10% of the company’s output at 498mt and sales at 663mt last year.
It is understood that the proposed cuts, probably as a response to government calls for output caps, will mainly come from its under-performing coking coal mines in Inner Mongolia and low quality steam coal mines with long railing distances, which will help reduce operating losses.
Shenhua offi cials commented simultaneously that they expect that the moves taken by the company will lead to more operation stoppages and a new wave of consolidation in the domestic coal market. Analysts predict that the company may have worked out plans for taking over smaller miners that will be forced to halt business due to poor economic condition for coal sales.
It is also understood that other major producers are mostly unable to make similar production cuts, as this will mean high amounts of compensation because more workers are hired in the more costly underground operations. However, the earlier price cuts have already led to large numbers of coal companies falling into the red over the past few months.
Most of China’s major producers are thought to have had to follow suit and lower prices accordingly, over the recent months, in a bid to maintain their market share.
The Shenhua pricing strategy has helped to cut coal stocks at its Huanghua port to 1.63mt by July 28, compared with recent high of 2.79mt on July 13. Insiders expect
Domestic Chinese prices set to bottom out in August 1Chinese Import settlements become more diffi cult 4China to impose coal production cuts 4China’s coal resource tax reform to be introduced this year 5China’s GDP growth edges up 5PMI reading climbs further 6China’s railway construction to accelerate in H2 6China’s power demand increases in June 6China’s hydro power output strong in June 7Coal miners see fi nancial status worsen in China 7CEC adjusts down power demand forecast 7Datang withdraws from coal-to-chemicals 8China promotes low emission units 8
MACROeCONOMIC
China to accelerate infrastructure building 9China pushes mixed ownership 9
GOveRNMeNT
China tightens control over coal conversion 9Xinjiang plans giant coal scheme 10Xinjiang boosts railing capacity 10Chinese steam coal, iron ore swaps to debut in August 11
MARkeTS
Chinese met prices edge down further 11China’s coal exports pick up further 11SOEs dominate China’s top coal importers 12
pOweR INDuSTRy
Power output climbs in June 12Hydro power capacity jumps in China 12China’s State Grid to accelerarate UHV building 13China’s power industry reforms to speed up 13
Offshore wind farm growth gains speed in China 13China’s wind capacity climbs 23% in H1 14
STeeL INDuSTRy
Chinese steel prices remain at low levels 14Chinese steel mills’ profi tability worsening 15
pRODuCTION & STOCkS
China’s H1 coal production falls 15Inventories at China’s ports start to fall 16
TRANSpORTATION
China Power Investment to build railway 16China’s rail and port handling improves in June 17
OTheRS
Yitai to build coal liquefaction in Xinjiang 17China’s gas demand increases 17Third round of Chinese shale gas auction planned 18Mongolia looks to export gas to China 18China faces LNG oversupply 18Chinese energy structure changing 18
COMpANIeS
Shenhua wins green light for Oz mine 18Shenhua drills shale gas wells 19
pORTS
Raw coal output (000t) 20Stocks of port (mt) 20Stocks of port (mt) - July 2014 20Shipments of major ports (mt) 20Deliveries of state-owned railways (mt) 20Domestic seaborne freights (RMB/t) 20Stocks by producer (mt) 20Coal consumption of major power plants (mt/day) 20Coal stocks at major power plants (mt) 20International seaborne freights ($/t) 20
IMpORTS
Imports by country (000t) 21Imports by type (000t) 21Imports by region (000t) 22Imports by region and type (000t) 22Imports by company (000t) 23Imports by quality (000t) 23Imports by region (000t) - May 2014 23Coal imports (000t) - May 2014 23Imports by country (000t) - May 2014 23
expORTS
Exports by country (000t) 24Exports by type (000t) 24Exports by company (000t) 24China’s coal exports (000t) 25Shanxi exports (000t) 25Total exports (000t) 25Shenhua exports (000t) 25Minmetal exports (000t) 25Total anthracite exports (000t) 25Total coking exports (000t) 26
COke
Coke exports by country (000t) 26Coke imports (000t) 26Total steam exports (000t) 26Coke production (000t) 26Coke production by region (000t) 27
that the Chinese coal market sentiment may improve next month, although near-term weakness may continue sometime, with further cut possible at Shenhua which can withstand additional cuts of at least RMB50-60/t ($8.1-9.8/t) while still earning profits for its 5,500kc NAR quality.
The projected recovery is mostly due to expected rising demand from a steady recovery in macro economic performance.
The country’s official Purchasing Manager’s Index (PMI) figure for the manufacturing sectors increased to 51% in June, up another 0.2 percentage point from May, and marking the fourth month of growth in a row.
The reading for July may edge up further, with the HSBC flash PMI hitting 52 in the month, up from June’s final reading of 50.7. It was the highest level since January 2013, and stood above the 50-point boom-or-bust line for the second consecutive month.
Hydro production is predicted to edge down during August, while power consumption will hit its seasonal high in the month. In August 2013, hydro power output was 84.17bn kWh, down from 85.4bn kWh in July, and slumping 10.1% year-on-year. The figure dropped further to 78.3bn kWh in September and 69.4bn kWh in October.
However, production is predicted to come down from August, as the state-owned groups are set to carry out production cuts following calls for a 10% reduction from the China National Coal Association (CNCA). It’s also believed that the government is to
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CIF Guangzhou, basis 5,500kc NAR (RMB/t)
Source:CCM
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QHD-Shanghai in 40,000-50,000t vesselsQHD-Guangzhou in 50,000-60,000t vesselsQHD-Ningbo in 15,000-20,000t vessels
introduce more measures to stabilise the domestic coal sector.It’s also anticipated that China’s domestic prices may rebound
in September, when the stockpiling for winter heating begins and before the routine maintenance on the key Daqin railway line kicks off in October.
Chinese Import settlements become more difficultThe ShARp pRICe falls in the domestic market since June have dramatically dampened new deals into China, with traders having mostly stopped new business while dumping much of thier previously booked cargoes continues.
As of June 29, 5,500kc NAR material from Shenhua was traded at RMB475/t ($77.24/t) FOB, which is equivalent to $66.01/t exclusive of VAT. In the same time, some spot deals were heard being done at RMB471/t ($76.46/t), equating to $65.35/t excluding tax.
Despite the already low levels, market participants have remained nervous that domestic mining giants may cut prices again before late August, as few players seem to be bullish about demand before that time.
Imported cargoes were being traded at around $65.00/t CFR, basis 5,500kc NAR, around the end of July, down from $69.50/t at the end of June and $72.75/t at May close, according to the IHS Energy/Xinhua Infolink South China CFR marker.
Meanwhile, cargoes booked earlier by traders, many believed to have been acquired for financing purposes, were being dumped at even softer prices as low $63/t CFR, basis 5,500kc NAR, according to market sources.
This has left imports with little or no competitive edge currently, as Chinese users would traditionally ink import deals only when prices are at least $1.5/t below the domestic FOB levels.
This is despite increasing numbers of players suggesting that the CFR price fall may slow down in a few weeks time as suppliers have been incurring tremendous losses and would rather sell cargoes to other markets like India.
However, the Chinese import market still has a chance to rebound in later months, market players suggest. They forecast that domestic price levels may rebound in September, with the trend predicted to last into the winter months, which may lead to increases in deals settlements.
But before that, import tonnages are expected to be largely stable at around 24-26mt/month.
Imports expand in JuneThe country’s total import figure climbed in June due to more lignite arrivals, after the import ban on low quality coals became clear and proved to be insignificant in May.
Total arrivals came to 25.05mt in June, up 1.04mt, or 4.3%, from 24.01mt the previous month, and also rising from 22.31mt in June last year, according to the preliminary customs statistics.
The increased tonnage mainly came from lignite, which is also used for power generation. Lignite arrivals climbed to 5.89mt in the month, up 1.18mt, or more than one quarter, from 4.71mt in May, and also soaring 36.3% from 4.32mt imported in June last year.
Coking coal imports dipped further to 5.72mt, versus 5.88mt, but still up nearly 1mt from 4.7mt in June 2013. Arrivals from Australia decreased to 2.52mt from 2.96mt in May, but the tonnage from Mongolia rose to 1.87mt from 1.58mt.
Steam coal imports, which also include sub-bituminous coals, came to 10.94mt in June, which was flat to May and up from 9.75mt in June last year. Tonnages from Australia expanded to 5.23mt from 4.81mt in May, and receivals from Indonesia rose to 3.68mt from 3.07mt.
Purchases of anthracite remained stable at 2.5mt, similar to 2.47mt in May, but falling sharply from 3.58mt in the same month of last year.
This saw the tonnage from North Korea at 1.4mt, versus 1.31mt in May and 1.6mt in June last year, while imports from Vietnam were 0.63mt, up from 0.46mt in May, but slumping 40.1% from June last year.
Year-to-date imports are at 159.87mt, up 0.9% from 158.6mt in the first half of last year. This includes 75.64mt of steam coal, up from 72.07mt in the same period of last year, and 30.96mt of coking coal, slipping 12.3% year-on-year from 35.33mt.
Year-to-date anthracite imports stood at 17.03mt, dipping 19.2% year-on-year from 21.1mt, and lignite arrivals came to 36.21mt, jumping 34.3%% from 30.09mt imported in the first half of 2013.
China to impose coal production cutsChINeSe AuThORITIeS ARe preparing a policy for coal production cuts, which could order producers to cut production by at least 10% this year, from last year’s level of 3.7bn tonnes.
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China’s coal imports (mt)
Source: CCM
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4,900kc NAR5,500kc NAR6,000kc NAR
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China National Coal Association (CNCA) chairman Wang Xianzheng told a coal event in Dalian on July 24 that related government agencies have been studying the issue and are expected to implement the policy in the near future.
Shenhua was the first to respond to the policy, vowing to cut its output by 50mt and sales by 60mt this year, which accounted for 10% of its output of 498mt and sales at 663mt last year.
Earlier at a seminar held on July 12, 14 major producers from Shanxi, Inner Mongolia and Shaanxi expressed support for the policy.
In addition to the production reduction, the Chinese government is to begin its low quality import ban, and it is also working to lift the 10% coal export tariff so that tax levels will be the same for imports and exports, said the CNCA chief, although no schedule was given.
Meanwhile, mines with depleting resources and higher production costs will be left to go bankrupt, although the government is to provide financial assistance in such cases.
Through these measures, the CNCA hopes China’s domestic prices will reach levels of around RMB550-660/t ($89.28-107.14/t) FOB, basis 5,500kc NAR, which will be in sharp contrast to those available currently - RMB475/t FOB, basis 5,500kc NAR (or, $77.24/t).
These policies may help producers finally realise profits, after months of severe difficulties for most Chinese miners. It is understood that more than 70% of China’s coal groups are operating in the red at present, with at least 50% of them facing difficulties in salary payments.
Profits from the coal industry as a whole totaled RMB61.31bn ($9.97bn) in the first half of this year, falling 43.9% from the same period of last year, according to the National Bureau of Statistics.
China’s coal resource tax reform to be introduced this yearChINA IS TO extend its ad valorem resource tax reforms to the coal sector later this year, after carrying out a similar policy in the oil and gas sectors in 2011.
The plan was confirmed by Jia Kang, researcher of the Ministry of Finance, at an environmental protection forum on July 19.
Different sources anticipated that the rate might be set at around 2-5% based on mine prices, which will equates to an additional RMB7.5-18.75/t ($1.22-3.05/t) of extra costs. This is based on the average mine price of RMB375/t ($60.98/t) in Shanxi this year, which fell from RMB465/t ($75.61/t) last year, according to local government’s survey.
The new rate is much higher than China’s current resource tax on coal, which is based on production tonnages, and stands at RMB0.3-5/t ($0.05-$0.8/t) for thermal and other types of coal and RMB8-20/t ($1.3-$3.3/t) for coking coal.
The country started to collect the ad valorem resource tax on crude oil and natural gas nationwide in 2011. Prior to that, the policy was piloted in Xinjiang in 2010.
The reform has been delayed many times as the previous government believed that the higher tax may add inflation pressure at a time that commodity prices had been on a rise due, in part, to the government’s stimulus measures.
China’s CPI growth has held at low levels in recent years, however, as the GDP growth slowed while tighter liquidity control was imposed to reduce risks in the financial markets.
Meanwhile, local governments have been reducing various surcharges imposed previously on coal, which is thought to be paving the way for the launch of the new resource tax. It is estimated that in Shanxi, tax and surcharges totaled approximately RMB170/t ($27.64/t), more than 40% of miners’ production costs.
China’s GDp growth edges upChINA’S GDp GROwTh climbed marginally in Q2 this year, after previously launched incentive measures began to impact.
Q2 growth was 7.5%, accelerating from 7.4% in Q1, according to the National Bureau of Statistics (NBS). For the whole of H1, the rate stood at 7.4%.
The country’s actual GDP figure for Q2 was RMB14.08 trillion ($2.29bn), compared with RMB12.82 trillion ($2.08 trillion) in Q1.
This has seen production of the industrial and construction sectors rise to RMB6.63 trillion ($1.08bn), up 13.12% from RMB5.76 trillion ($936.66bn) in the previous quarter.
The extractive, agriculture and forestry sectors saw output expand to RMB1.2 trillion ($195.12bn) from RMB777.6bn ($126.44bn) in Q1, but the figure for the services sector dipped to RMB6.25 trillion ($1.02 trillion), from RMB6.29 trillion ($1.02 trillion) in Q1.
Overall industrial growth was 9.2% y-o-y in June, up from 8.8% in May and 8.7% in April.
Crude steel production increased 4.5% y-o-y, versus 2.6% in the previous month. However, cement output dropped to 231.96mt in June, down from 234.27mt in the previous month, and the y-o-y growth rate fell from 3.2% to 0.8%.
Output of sheet glass dropped to 70.33m boxes, down 1.55% from May and down 1.9% from June last year. This was in contrast to a year-on-year growth of 6.4% in the previous month.
Meanwhile, automobile production slid to 2.03m units in June, down from 2.13m units in May, and the y-o-y growth slipped to 11.2% from 12.2% in the previous month.
Mainstream economists remain bearish about the mid-term outlook, as the current growth is heavily dependent on infrastructural related investment, at a time when consumption and export trade has been on a downtrend.
The GDP growth may stagger at around 7.3-7.5% in the remaining two quarters of this year, which means the earlier 7.5% target set for the whole year may be missed, the economists said.
pMI reading climbs furtherChINA’S MONThLy MANuFACTuRING activities have expanded once again, with the official Purchasing Manager’s Index (PMI) figure for the manufacturing sectors increasing to 51% in June, up another 0.2 percentage point from May, marking the fourth month of growth in a row.
All the major sub-indices have also shown improvement over the month, with the production index hitting 53%, growing 0.2 percentage point month-on-month. The new orders index was 52.8%, climbing 0.5 percentage point, while the new export orders index was up by one percentage point to 50.3%.
This suggests that the recent weakness in China’s macro economy has started to bottom out, following incentive measures introduced over previous month. The recovery to expected to continue in later months, according to analysts.
The PMI index for the steel sector hit 48.3% in June, up 1.9 percentage points from the previous month, though remaining below 50% for the second straight month.
The country’s manufacturing confidence may have climbed even further in July, with the HSBC flash PMI hitting 52 in the month, up from June’s final reading of 50.7. It was the highest level since January 2013, and stands above the 50-point boom-or-bust line for the second consecutive month.
The production index for June was 52.8, hitting the highest in 16 months, while the new orders index climbed to a 18-month high of 53.7. Increases were also reported for the indices of new export orders, employment and input prices.
China’s railway construction to accelerate in h2ChINA’S CONSTRuCTION OF railways is to gain speed in H2 this year, amid the government’s efforts to support economic growth through infrastructure construction.
Construction on 14 railways has been started or will kick off shortly, and approvals for an additional 44 projects will be handed out by the end of August, according to China Railway Corporation.
The first 14 railways will have a combined length of 3,712km, and
total costs are estimated at RMB327.3bn ($53.22bn). More than half of these lines are located in western regions, according to analysts.
On June 30 alone, construction began on four passenger lines, and on July 3 the railway from Xinjiang’s Hami to Ejina in Inner Mongolia began construction. Work on the remaining nine railways will begin soon.
China’s railway construction normally speeds up in H2, and this year may see a surge as investment in H1 was low, analysts said.
To support these projects, the China Railway Corporation is planning to issue RMB60bn ($9.72bn) of bonds in H2, having raised RMB90bn ($14.6bn) from April 10 to July 8.
Meanwhile, authorities may establish a rail line development foundation of RMB200-300bn/yr ($32.42-48.62bn/yr), with a plan released jointly by the National Development and Reform Commission, the Ministry of Finance and the Ministry of Transport on June 25.
China’s power demand increases in JuneChINA’S pOweR DeMAND increased in June, on the back of higher temperatures, with total consumption at 463.9bn kWh, up 3.27% from 449.2bn kWh in May, and rising 5.9% from June last year, according to the National Energy Administration.
The year-on-year growth climbed from 5.3% in May and 4.6% in April. And on a daily basis, the June figure came to 15.46bn kWh/day, growing 6.7% from 14.49bn kWh/day in May.
Consumption of the industrial sectors was 342.3bn kWh in June, up 1.06% from 338.7bn kWh in May, but the average daily figure came to 11.41bn kWh/day, up 4.4% from May’s level of 10.93bn kWh.
Consumption of the service sector and households also increased. The use of the service sector was 54.7bn kWh, up from 47.5bn kWh in May, and rising 9% from June last year. And households consumed 51.1bn kWh, up from 48.9bn kWh in May, and expanding 8.1% year-on-year.
Consumption from the extractive, agriculture and forestry sectors was 9.8bn kWh, climbing from 8.3bn kWh in May, and up 0.3% y-o-y.
Total power consumption in H1 came to 2.63 trillion kWh, growing 5.3% from the same period of last year. And industrial demand was 1.9 trillion kWh, up 5% y-o-y.
The service sector used 313.8bn kWh in the period, up 6.9%, and residential use also climbed 6.6% to 337.8bn kWh. But consumption of the agricultural sectors remained low at 43.5bn kWh, down 4.6% from the same period of last year.
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China’s pMI reading
Source: CCM
China’s power demand (bn kwh)Sector Jun-14 May-14 Jun-13 year-to-
China’s hydro power output strong in JuneChINA’S hyDRO pOweR output saw a strong increase in June, a major factor in the decline of thermal coal prices in recent weeks.
Total hydro power production came to 87.5bn kWh in the month, up 18.24% from May.
On a year-on-year basis, the growth was 4.4%, down from 9.2% in May and 21% in April, according to the National Bureau of Statistics, which measured only the output of power plants above 6,000kW.
The lower y-o-y growth in June was mainly due to a number of hydro-rich regions suffering from droughts in the same month of last year. Less than normal rainfall is understood to have emerged again in some regions in the month.
Average water supply into the Three Gorges reservoir stood at 15,612m3/second in June, down 16.06% from normal levels in previous years, and the supply to Xiangjiaba slumped by 46.54%.
The total usable water level was 24.97bn m3 at the end of June, down 3.98bn m3 or 15.94% from a year ago. Such a level allows for 4.37bn kWh of power generation, down 647 million kWh or 14.81% year-on-year.
The strong hydro production squeezed demand for thermal power, with the figure rising to 346.1bn kWh in June, up just 1.7% from 340.3bn kWh in May, though up 6% y-o-y.
Year-to-date hydro power output stood at 371.3bn kWh, up 9.7% from H1 last year, although the growth has slowed from 11.3% in the first five months, and is also lower than 11.8% in H1 last year.
Coal miners see financial status worsen in ChinaThe FINANCIAL STATuS of China’s coal miners has worsened further due to slumping coal prices, and this has pressed local governments to provide continued support to miners.
Port prices have slumped to the lowest levels for at least seven years, with spot prices at RMB485/t ($78.86/t) FOB as of mid-July, basis 5,500kc NAR.
This compares to RMB583/t ($94.80/t) one year ago, RMB641/t ($104.23/t) two years ago, and RMB837/t ($136.10/t) three years ago, based on the Bohai-Rim index.
Profits of China’s coal industry had slumped to RMB51.26bn ($8.33/t) in the first five months of this year, down 43.9% year-on-year, according to the National Bureau of Statistics.
Meanwhile, a survey carried out by the China National Coal Association (CNCA) showed that of the 36 coal groups surveyed in 17 producing provinces, 20 operated in the red from January-May, with an additional nine struggling at the break-even point.
Producers in nine provinces were operating at losses across the board, with difficulties particularly severe in traditional mining regions.
In Shanxi, of the local 1,100 miners, 606, the equivalent of 53%, incurred losses in the period, with 27 projects suspending operations due to losses.
Further cost reductions at the mines have become increasingly difficult, as the costs in safety expenses, payroll, compensation for surface subsidence, and environmental work have exceeded 70% of the production costs for a large numbers of producers.
Adding to this is the mounting financial costs at major companies, which increased 16.2% to approximately RMB4bn ($0.65bn) after massive consolidation in previous years.
In Shanxi, the seven major groups have spent RMB120bn ($19.48bn) for consolidation, with at least an additional RMB100bn ($15.15bn) earmarked for later.
As a result, the average debt-liability ratio of Shanxi’s major coal companies topped 70% at the end of April, with the rate for some groups exceeding 80%.
Local governments release coal favouring policiesLocal governments in major coal-producing regions are kicking off more measures to ease producer burdens, in a bid to prevent miners going bankrupt.
Inner Mongolia lowered a number of local charges, estimated at RMB10/t ($1.63/t), on July 1, with a number of fees collected by railway bureaus also lowered from July.
The neighbouring Shanxi province is looking to scrap charges on coals transported to other regions, although the rate has been lowered to RMB17/t ($2.76/t) from RMB32/t ($5.20/t).
Prior to this, Shanxi reduced five local charges at a combined rate of RMB14.3/t ($2.33/t) in June.
Shaanxi, the third largest producer in China, has allowed coal mines to use mining licences as mortgages in applying bank loans. Meanwhile, the province also plans to suspend highway tolls for coal trucking in H2.
Heilongjiang in northeast China decided to inject RMB3bn ($487.80bn) into Longmei, the largest coal producer in the province. The company is on the verge of bankruptcy, with liabilities topping RMB40bn ($6.50bn) and a debt ratio above 82%.
Sichuan province in south-western China also suspended its coal price adjustment fund on June 3, and two weeks later it released another document requiring more reduction in coal related fees and surcharges.
This has done little to help mine profits improve, however, as market prices suffered steeper falls in July following the release of the policies.
CeC adjusts down power demand forecastChINA’S pOweR DeMAND is expected to increase 6% this year to 5.64 trillion kWh, from 5.32 trillion kWh in 2013, China Electricity Council’s (CEC) secretary-general Wang Zhixuan forecast on July 24.
The growth rate represents a slowdown from 2013’s level of 7.5%, and also stands below the CEC’s previous expectation of 7%, made at the beginning of this year, and after H1 demand increased just 5.3% to 2.63 trillion kWh.
This is amid continued gloomy prospects for China’s H2 economic performance, with problems mounting on local-government debts, a rise in credit risks, and anticipation that real estate sector, which accounts for some 15% in GDP growth, is set to cool further.
A recent survey indicates that most economists remain cautious about GDP growth in Q3 and Q4, projecting the rate could be 7.4%, down on Q2’s 7.5%, and similar to 7.4% in Q1. This may put the whole year’s growth at 7.4%, compared with the year target of 7.5%, and will be the lowest level since 1990.
This is also reflected by the stable operation hours of power units, which may stand at 4,400-4,500 this year, compared to 4,511 hours in 2013. Performance for thermal units is forecast at 4,950-5,000 hours, versus 5,012 hours last year.
CEC’s statistics indicate that 96GW of new power units are set to be commissioned this year, bringing overall power capacity to 1,340GW by the end of 2014, which is a growth of 7.5% year-on-year.
Separately, 30GW of additional coal-fired units will be put into operation, increasing the capacity to 820GW by the end of 2014. Capacity of non-fossil units will increase 60GW to 450GW, accounting for 34% of the total, versus the proportion of 30.6% in 2013.
Wang believes that China’s power tariffs will enter a rising path, as the country has been investing heavily on green power, which tends to be more expensive.
Datang withdraws from coal-to-chemicalsDATANG pOweR hAS agreed to sell all its coal–to-chemicals assets to China Reform Holdings Corp., a state-owned asset management company under the State-owned Assets Supervision and Administration Commission, after encountering various difficulties financially and technologically.
According to the agreement reached by the two sides on July 7, the transfer of assets will cover two coal-to-gas facilities in Inner Mongolia’s Keshiketeng and Liaoning’s Fuxin respectively.
Both had been Datang’s flagship projects in the coal conversion sector.The Keshiketeng plant was China’s first coal-to-natural gas
project. The first 1.33bn m3/yr production line was commissioned at the end of December last year, but operations were halted by major technological problems for nearly two months, just a month after production began.
For the first phase alone, costs of construction stood at RMB16.5bn ($2.68bn). Two more production lines will be completed late this year and next year, adding 4bn m3/yr to the total capacity.
The Fuxin project was also designed at 4bn m3/yr, with construction having started in 2010. Datang had aimed at commissioning at the end of 2013, but has yet to start operations as of the end of July.
The asset sale also includes a number of projects developed in Inner Mongolia, such as the coal-based methanol-to-propylene facility in Duolun, a coal-based fertilizer plant in Hulunbuir, and a coal mining company in Xilinhot.
It is understood that other power companies are faced with similar problems as well, and some of them have also started splitting assets.
Guodian Group, China’s second largest power generator, decided to sell its 45% stake in Ningxia Energy and Chemical Company for RMB2.6bn ($421m) to a subsidiary of Sinopec in April this year. After the sale, Guodian will hold a 5% stake in the company.
China’s power groups began to expand into the coal conversion sector in 2010, when they took over large amounts of coal resources from local governments.
For a 7bn tonne lignite deposit in eastern Inner Monglia, Datang agreed to build a 0.46mt/yr coal-to-polypropylene project and a 4bn m3/yr coal-to-natural gas plant in the region. And in order to develop 60mt/yr of coal reserves, Guodian decided to build six coal-to-chemicals projects.
However, various problems emerged after these projects are initiated, such as a lack of funds, mature technology and a lack of professional knowledge.
Datang has spent RMB58.4bn ($9.50bn) on the projects. However, most have been incurring losses, as well as delays. These projects created a combined deficit of RMB2.1bn ($340m) to the company in 2013, with total debts hitting RMB59.7bn ($9.68bn).
The losses were in contrast to the RMB8.8bn ($1.43bn) of profits generated by the company from its thermal power business last year, and dragged down its overall profits by 11% to RMB3.5bn ($567m).
Higher costs than previously expected also brought extra pressure to generators. For Datang’s coal-to-natural gas plant in Inner Mongolia’s Keshiketeng, the total costs have exceeded RMB31.3bn ($5.09bn), versus the originally estimated RMB25.7bn ($4.18bn).
And its coal-based methanol-to-propylene facility in Duolun has cost an additional RMB6.18bn ($1bn) compared with the previously expected RMB16bn ($2.60bn).
China promotes low emission unitsChINA IS expeCTeD to initiate an upgrading campaign among coal-fired thermal power plants, aimed at reducing emissions of thermal power amid increasing air pollution pressure.
This is thought to be spurred by the implementation of China’s strict air pollution standards for thermal power plants on July 1, which set maximum dust emissions at 20mg/m3, SO2 emissions at 50mg/m3, and NOx emissions at 100mg/m3.
It is also backed by recent successful experiences by generators and local governments, the latest being the commissioning of Shenhua’s “nearly zero emissions” unit at its Zhoushan Power Plant in Zhejiang on June 25.
Through upgrading, the 350MW unit has achieved “virtually zero emissions”, with emission figures less than half of the levels for natural gas-based units. Specific figures are 2.5mg/m3 of dust, 2.8mg/m3 of SO2 and 20.5mg/m3 of Nox.
It is understood that a number of companies and local governments have drawn up plans for thermal power plant upgrading.
Shenhua plans to rebuild 46 of its existing 61 coal-fired units by 2017, and newly-built units will be fully in line with the same standard.
Zhejiang province requires emissions of major pollutants from all its coal-fired power plants to reach the emission standards of natural gas-based units by 2017.
Guangzhou aims to upgrade 14 coal-fired units with combined capacity of 3.8GW by July 1, 2015. Guangzhou is looking to reduce its thermal power emissions by 60-70% by 2020 from 2013 levels.
All of the five major power groups are also understood to be making plans for technical upgrading on units in east China, and have started a number of tests for that purpose.
Datang has said that it will upgrade its two 660MW units at Nanjing into units of ultra-low emissions, and will finish the work by the end of this year.
Guodian is upgrading its facility at its Shiheng power plant in Shandong, and Huadian is carrying out the work at the Laizhou power plant, also in Shandong.
This is also proving feasible economically. The upgrading is expected to see an extra cost of RMB0.01-0.015/kWh ($0.0016-
$0.0024), from the current thermal power production cost at RMB0.3-0.4/kWh ($0.0486-$0.0648).
This is based on the calculation that the upgrading work usually costs RMB160,000-200,000/MW ($25,931-$32,415), and brings the total costs to RMB0.31-0.415/kWh ($0.0504-0.0675/kWh).
The figure is still much lower compared with the cost at gas-fired units, which average RMB0.8/t ($0.1297/t), on the basis of gas prices standing at RMB2.7/m3 ($0.44/m3) currently.
This is also in line with the strategy of the central government, with president Xi Jinping calling for a “revolution” in energy technology and production in June.
It’s likely that coal will continue to dominate China’s energy supply in the next few decades once the problem of emission control is well addressed, analysts said.
MACROeCONOMIC
China to accelerate infrastructure buildingThe ChINeSe GOveRNMeNT is set to focus at pushing infrastructure construction in the near future, after statistics indicate that its own 7.5% GDP growth target set for the year could be missed.
Economists are largely projecting Q3-Q4 performance at below 7.5%, although the National Bureau of Statistics (NBS) pegged H1 GDP growth at 7.4%.
Of the 31 provinces and municipalities, 30 have failed to achieve their growth targets in H1, although a large number of regions started to prepare local incentives since last month, according to the NBS.
The State Council said that work groups it had sent to some provinces and government departments have anticipated that GDP growth in many regions will continue the earlier down trend.
In light of this, the State Council promised, at a recent meeting, that it would work to ensure the 7.5% target is fulfilled.
To achieve this, the central government has called for a speed up in the construction of rail lines, urban infrastructure, hydro facilities, as well as the reconstruction of old urban areas.
China pushes mixed ownershipThe ChINeSe GOveRNMeNT is busy pushing the mixed ownership concept to the country’s large numbers of state-owned enterprises (SOEs), in a bid to promote competition, reduce corruption, while at the same time boosting investment.
A pilot plan is expected to be announced very soon, a source from the State Owned Assets Supervision and Administration Commission revealed.
Companies that will be covered by the pilot plan include Guodian, COFCO, China Resources, China National Building Materials Group, State Development and Investment Corporation (SDIC), China Merchants Group.
China has seen limited progress in reforming SOEs in the past due to strong resistance from various interest groups. Authorities hope that via the reforms, the interest from private firms in investing into SOEs will increase, although the idea is still being questioned by observers.
However, the process is still expected to be cautiously carried out. The state-asset watchdog – the State Owned Assets Supervision and
Administration Commission - has set the tone for the upcoming reform, according to which the process will be long-termed with the promise of careful research and testing.
For industries where full competition has evolved, the government is ready to withdraw completely and let private firms play out their roles, although the list for such sectors has not been worked out as yet, the agency said.
In high-tech industries or growth-engine industries, the government may retain a controlling position, in a bid to exercise influence on the macro economy.
For areas which are critically important for the economy, the government may still insist on absolute ownership in related companies. Sectors that are concerned with national security will be completely off limits to private companies.
The agency has planned to release a detailed plan guiding the reform within 1-2 weeks. Based on the agency’s position so far, it’s expected the plan will not be as attractive as top officials have hoped, analysts believe.
It’s understood that a large number of China’s major groups have already prepared plan for ownership reform, but the agency has not allowed them to proceed with them at present.
GOveRNMeNT
China tightens control over coal conversionChINA hAS INCReASeD its control over the development of coal conversion projects, with a new rule released by the National Energy Administration on July 17, However, more detailed thresholds are still being drafted and will be imposed soon.
According to the new rule, laid out in an official document, coal gasification facilities should be above 2bn m3/yr in capacity, with coal liquefaction facilities below 1mt/yr also being banned.
It also stipulated that regions with limited water resources and already high emission levels will not be allowed to build new coal conversion projects.
The move is understood to come after the rising concerns emerged recently over technical and environmental problems, as well as the profitability outlook for the sector.
Coal gasification projects are believed to be facing more challenges compared with coal liquefaction. The top coal gasification developer, Datang, has agreed to sell its two coal gasification facilities, its Inner Mongolian Keshiketeng plant and its Liaoning’s based Fuxin plant, respectively (see related story).
Technological and financial difficulties are understood to be behind Datang decision to split the assets. Similar difficulties are also said to have delayed the 4bn m3/yr project by Guanghui in Xinjiang.
Water supply is another concern for the development of coal conversion projects, as 80% of the planned capacity is located in northwestern China, which has limited water supply.
The planned coal gasification plants in Xinjiang alone are expected to consume 680mt a year of water, at a time when Xinjiang’s water consumption has already exceeded an earlier set maximum limit. In 2013, consumption was 61.7bn tonnes, versus the limit of 51.56bn tonnes/yr set by the central government for 2015.
China has commissioned 2.7bn m3/yr of coal gasification facilities
so far, including the first phase of Datang’s Keshiketeng plant at 1.33bn m3/yr and the first phase of Qinhua’s plant in Xinjiang’s Yili at 1.375bn m3/yr. Projects with approximately 200bn m3/yr of capacity have been approved or planned.
The coal-to-oil sector has built 1.45mt/yr of facilities across the country. This includes the 1.08mt/yr plant in Inner Mongolia’s Erdos by Shenhua, the 0.16mt/yr by Yitai also in Erdos, 0.21mt/yr by Lu’an in Shanxi. Meanwhile, another 18.22mt/yr of facilities have received approvals.
xinjiang plans giant coal schemeThe COAL-RICh ReMOTe region of Xinjiang in northwest China has drawn up ambitious plans for coal development, with plans for 22 mining areas approved by the central government.
The 22 mining areas, with combined capacity at 817mt/yr, include the mining areas of Wucaiwan, Dajing, Xiheishan, Santanghu, Naomaohu, Balikun, western part of Dananhu, Tashidian, Kemusite, Kbuerjian, A’ai, Hutubi Baiyanghe, Ta’erlanggou, Baicheng, Kelatuzi, Buya, Ehuobulake, Liuhuanggou, Sulahema, Shajihai, Yining and Dananhu.
Meanwhile, Xinjiang is looking at gaining approval for 20 additional plans, with 12 totaling 522mt/yr awaiting consent, and plans for eight new mines, at 407mt/yr, being made.
Total capacity of the 42 mines will total 1.75bn tonnes/yr, roughly a half of China’s total output of 3.7bn tonnes last year.
Xinjiang is aiming at a coal capacity of 400mt/yr by 2015, of which 100mt/yr will be sold to other provinces, from around 30mt/yr currently.
xinijang wins green lights for two minesTwo new mines were cleared to start initial preparations in July, with combined capacity of 31mt/yr.
One is the second phase of the Dajing coal field, which could produce 20mt/yr. The coal field as a whole is designed to mine 30mt/yr, with the first 10mt/yr having been approved in 2012.
The Dajing coal field is a supporting project to the 1,100kV power line from Zhundong to Anhui in east China, which is expected to enter construction in H2 this year.
The power line will have a capacity of 13.2GW, and will be capable of supplying 66bn kWh of power.
The other mine is the 12mt/yr Alaandaonan coal mine at the Kemusite mining area. The coal mine will mainly supply Guanghui’s 4bn m3/yr coal gasification project, which is scheduled to be commissioned in 2015.
xinjiang boosts railing capacityxINJIANG IN NORTh-weSTeRN China has geared up for railway construction, with work on three major railways started so far this year, and another two expected to enter construction by the end of the year.
The most recent project was the 629.9km Ejina – Hami line, which kicked off on July 3. It will be capable of delivering 30mt/yr, with total costs at RMB8.87bn ($1.44bn).
This will comprise 212km within Xinjiang, 127km in Gansu, and 290km in Inner Mongolia. The railway will become another outlet of Xinjiang, as it will connect to the Lince line at the east end, thus enabling cargoes to reach eastern coastal areas.
Prior to this, two railways began construction in April, with work on the Kelamayi-Tacheng line having started on April 13 and the Beitun-Aleai line following on April 26.
The Kelamayi-Tacheng line will be 291km long and will be capable of railing 10.42mt/yr upon completion in late 2016. Costs are estimated at RMB5.4bn ($878m).
It will be connected to railways in Kazakhstan at the Baketu border crossing, which will become Xinjiang’s third outlet to Central Asia and Europe.
And the Beitun-Aleai line, at 67km long, will be commissioned in October 2015. The railway is to deliver 3.18mt/yr in its initial stage, with spending at RMB8.27bn ($1.34bn).
Xinjiang is also trying to start construction on two more lines this year. One of these will run from Kuerle in Xinjiang to Geermu in the neighbouring Qinghai, which obtained approval from the National
New railways being constructed or planned in xinjiangRailway Length Capacity Costs Status Completion
Second Lanzhou-Urumqi line 1,776km Passenger line RMB143.5bn ($23.33bn) Construction started in November 2009. 2014
Hongliuhe-Naomaohu 435km 50mt/yr RMB10.87bn ($1.77bn) Construction started in March 2012. 2015
Kelamayi-Tacheng 291km 10.42mt/yr RMB5.4bn ($878m) Construction started on April 13. 2016
Beitun-Aletai 67km 3.18mt/yr RMB8.27bn ($1.34bn) Construction started on April 26, 2014. Oct-15
Ejina-Hami 649.8km 30mt/yr RMB8.87bn ($1.44bn) Construction started on July 3, 2014. -------
Jiangjunmiao-Hami 661km 34mt/yr RMB16.96bn ($2.76bn) Construction may start in 2014. -------
Kuerle-Geermu 1,223km 50mt/yr RMB36.5bn ($5.93bn) Construction may start in November 2014. -------
Development and Reform Commission in November last year.The 1,223km-long railway will include 709km in Xinjiang and
514km in the neighboring Qinghai province, and will become another major line connecting Xinjiang to other regions. It will be 50mt/yr in capacity and total costs are around RMB36.5bn ($5.93bn).
The other one is the Jiangjunmiao-Hami line, which is 661km long and will be capable of delivering 34mt/yr. The railway will join up to the Ejina – Hami line at Hami.
Meanwhile, Xinjiang is to conclude the construction of the second railway from Urumqi to Lanzhou at the end of this year. The 1,776km railway will be a passenger line, but will enable the existing Urumqi -Lanzhou line (70mt/yr) to be used as a cargo line.
In addition to this, the region will complete the Hongliuhe-Naomaohu line next year.
The railway is 435km long and will deliver 50mt/yr, with total costs at RMB10.87bn ($1.77bn).
Xinjiang’s railways totaled 4,911km at the end of 2013, up 518km from the end of 2012. It is expected to reach 8,200km by 2015.
Chinese steam coal, iron ore swaps to debut in AugustChINA IS TO launch steam coal and iron ore swaps on the Shanghai Clearing House on August 4, following official approval being received in mid July.
The RMB-settled trades will allow all Chinese registered companies to participate, with the steam coal swaps to be cleared on the basis of the FOB price of 5,500kc NAR materials pegged by the government-run weekly Bohai Rim index.
The contract size for steam coal swaps will be 200t, with minimum price fluctuation of RMB0.01/t ($). Three kinds of contracts will be released, including the monthly, quarterly and yearly.
The iron ore swaps will be based on the spot rate of 62% Fe products at ports, which will use the average the four domestic indices released separately by Custeel, Mysteel, and Beijing International Mining Exchange.
Contract size of the iron ore swaps will be 100 wet tones, with minimum fluctuation also at RMB0.01/wet tone ($).
China launched steam coal futures at the Zhengzhou Commodity Exchange in September last year, and kicked off the trading of the iron ore futures one month later in October at the Dalian Commodity Exchange.
SCH was founded in 2009 jointly by China Foreign Exchange Trade System, China Government Securities Depository Trust & Clearing Co., Ltd., China Banknote Printing and Minting Corp. and China Gold Coin Incorporation. It plans to trade energy, chemicals, metals and agricultural products by 2015.
MARkeTS
Chinese met prices edge down furtherChINA’S COkING COAL market has been relatively stable during July, backed by higher steel production. However, prices remained bearish as supply increased while the steel market remained gloomy.
In the top producing region of Shanxi, the price of high quality Liulin No.4 material (21% volatiles, 0.5% sulphur and 9% ash) was RMB800-850/t ($130.08-138.21/t) on July 25, down RMB10/t ($1.63/t) from RMB810-860/t ($131.71-139.84/t) at the end of June.
The price had been down RMB310-340/t ($50.41-55.28/t), down roughly one quarter compared with RMB1,150-1,170/t ($186.99-190.24/t) at the end of January, when this latest round of price declines started.
Steel mills have asked the suppliers to lower the price by a further by RMB30-50/t ($4.88-8.13/t) atfor the end of -July, with final rate still being negotiated.
Shandong-based Yankuang Group, a major coking coal producer, announced in mid-July that its coking coal prices had been lowered by an additional RMB30/t ($4.90/t), which has pput the combined declines, since the beginning at this year, at around RMB250/t ($40.60/t).
For small producers which lack reliable sales channels, the situation is thought to be even worse, with massive closures being recorded.
Wuhai Energy Company, Shenhua’s major coking coal producer in Inner Mongolia, has suspended operations on July 11 due to the huge losses. The company has a capacity of 16.15mt/yr.
It’s believed that all the mines in Wuhai have either shut down completely or operating at a minimum level, as demand has dipped to the floor while prices for local semi-soft coking coal stand at just RMB600/t ($97.4/t) FOR.
It is thought that domestic price levels have largely been the result of international price movements, which saw Austrian products soften by $21.05/t, to $114.2/t FOB on July 25, from $135.25/t FOB at the end of December last year, according to the IHS McCloskey. Therefore, the country’s seaborne imports remained high at 5.72mt over June, after buying 5.88mt in May. This figure was up more than 1mt compared with 4.7mt imported in June last year.
However, domestic coking coal prices may come under long-term pressure, with Mongolia seeking to expand delivery to China from 2014-2034, with yearly tonnage to hit 64mt by 2035.
The country shipped 7.53mt to China in the first six months, up 26.2% y-o-y. Meanwhile, average prices of Mongolian products slipped from $69.53/t in January to $56.82/t in June, according to Chinese customs statistics.
China’s coal exports pick up furtherChINA’S COAL expORTS climbed marginally in June, amid a slump in the domestic market, with total deliveries coming to 0.46mt, up from 0.43mt in May and 0.28mt in April, but still lower than 0.69mt in June last year, according to a survey of exporters by MCCM.
Shenhua’s deliveries rose to 0.23mt in June, up from just 0.07mt in May, but lower than 0.34mt in June last year. China Coal’s tonnage fell to 0.14mt from May’s 0.36mt, and was also lower than 0.19mt delivered in June 2013.
Minmetals shipped nothing for the fourth month in a row, while Shanxi exported 0.09mt from nothing last month, and down from 0.15mt in June last year.
Customs pegged June exports at 0.4mt, down from 0.49mt in May, and slipping 16.7% year-on-year.
Ports recorded June deliveries at 0.55mt, up marginally from 0.52mt in May, but down from 0.72mt in June 2013.
Year-to-date exports stood at 2.66mt, down 11.2% from H1 last year,
according to the MCCM survey. China Coal shipped 1.4mt, up 8.5% y-o-y, and Shenhua delivered 0.95mt, slumping 27.5% from H1 last year.
The year-to-date figure from the customs stood at 3.16mt, slumping 22.4% y-o-y, but the port figure climbed 2.6% to 3.56mt.
SOes dominate China’s top coal importerspRIvATe FIRMS BASeD in south China, which used to take a controlling position in the country’s coal imports, have largely retreated over the past two years, after incurring huge losses, with a number of them going into bankruptcy.
By contrast, Chinese state-owned enterprises (SOEs) have increased their stakes in the imports market, on the back of strong financial support from their groups.
Of China’s top 20 coal importers in the first half, only two were from the private sector, which are Shenzhen-based Rixin Shenglong, and Guangzhou’s Yuehe.
This is compared to 2013, when five were private companies, and in 2012, when the number of private firms stood at eight.
China’s top 20 importers imported a combined 51.51mt in H1, accounting for 32.2% of the country’s total of 159.87mt.
pOweR INDuSTRy
power output climbs in JuneChINA’S pOweR OuTpuT expanded in June, as temperatures climbed and the macro economy improved.
Total power generation came to 458.1bn kWh over the month, up 16.5bn kWh, or 3.7%, from 441.6bn kWh in May, and rising 5.7% year-
on-year, according to the National Bureau of Statistics, (which only includes output from units above 6MW).
Junes output included 346.1bn kWh of thermal power, which rose from 340.3bn kWh in May and expanded 6% from June last year. The figure accounted for 75.6% of the country’s total power output, down from 76.2% in the same month of last year.
Year-to-date power output stands at 2.62 trillion kWh, up 5.8% year-on-year, with the rate climbing from 5.7% over the first five months.
Year-to-date performance of thermal power units was 2.1 trillion kWh, rising 4.7% year-on-year. The rate was lower than total power output due to strong hydro power generation so far this year, but has climbed from 4.2% in the first five months.
Year-to-date hydro power generation came to 371.3bn kWh, increasing 9.7% from the same period of last year. However, the rate has slowed down compared with the year-on-year growth of 11.3% in the first five months.
hydro power capacity jumps in ChinaChINA’S hyDRO pOweR capacity has grown rapidly in the first half of the year, following the completion of major hydro power plant projects in south-western China.
The country commissioned a total of 13.01GW of new hydro power units in the period, soaring 46.34% on 8.89GW in H1 last year, according to the National Energy Administration.
This brought total hydro power capacity to 253.72GW as of the end of June, up 14.4% from one year ago, when year-on-year growth was 9.63%.
The capacity of new units coming online in June alone hit 4.66GW, surging 51.79% from 3.07GW in May, and more than doubling the 2.03GW completed in June last year.
This included the last two units of the Xiluodu Hydro Power Plant, which began operating on June 29 and June 30 respectively. The power plant is located on the Jinsha River in the bordering area of Sichuan and Yunnan provinces, and comprises 18 units in total.
The total capacity of the plant stands at 13.86GW, the second largest in China after the Three Gorges (22.5GW), and third largest in the world after the Itaipu Hydroelectric Power Station (14GW) in Brazil.
The Nuozhadu Hydro Power Plant, which lies on the Lancang River within Yunnan province, also brought its last unit online on June 26. The power plant comprises nine 650MW units, with total capacity at 5.85GW, the fourth largest in China.
And in early June, the Jinping No.2 hydro power plant on the Yalong River also commissioned a new unit, bringing the plant’s total capacity to 3.6GW. The power plant is expected to reach capacity of 4.8GW when two more units are completed by 2015.
The high growth in hydro power capacity is thought to have continued into July, with the last units of the Xiangjiaba Hydro
Power Plant and Jinping No.1 hydro power plants being completed on July 10 and July 12 respectively.
The Xiangjiaba plant is on the Jinsha River, and has a total capacity of 6.4GW, the third largest in China. And the Jinping No.1 plant is built on the Yalong River, with the combined capacity of the six 600MW units totaling 3.6GW.
The commissioning of new hydro power plants has enabled more power transmission to east China regions.
Major power lines from these power plants includes a 1,653km long line from the Xiluodu Hydro Power Plant to Zhejiang, which was commissioned on July 3 this year. The 800kV line is capable of sending 40bn kWh/yr of power, based on capacity of 8GW.
The Xiangjiaba Hydro Power Plant was connected to Shanghai via a 1,900km long 800kV line completed in 2009, with capacity at 6.4GW.
And the Nuozhadu plant mainly supplies Guangdong via an 800kV power line commissioned in September last year. The power line is 1,451km long and designed at 5GW.
Meanwhile, the Jinping No. 1 and No. 2 plants were linked to Jiangsu by a 2,059km-long line completed in 2012. The capacity of the line was designed at 6.4GW.
The combined capacity of the four power lines totals 25.8GW, which is equivalent to more than 10% of the maximum power load of the East China Grid. They are expected to reach full capacity when demand peaks this summer, according to the State Grid.
China’s State Grid to accelerarate uhv buildingThe STATe GRID is planning to further speed up the construction of UHV lines over the second half of the year, after a spending of RMB158.8bn ($25.74bn) in H1. This was an increase of 8.9% year-on-year.
The grid expects to kick off work on 10 UHV power lines in H2, increasing expenditure to RMB381.5bn ($61.8bn) for the whole year. This represents a year-on-year increase of 12.9%, after a growth of 10.64% in 2013.
Construction on the 1,000kV Huainan-Nanjing-Shanghai AC UHV line started recently, while the Xilingol – Shandong line, and the western Inner Mongolia – Tianjin line, have finished feasibility studies.
China wants to lift the UHV power transmission capacity to
210GW by 2015, and further to 450GW by 2020. China unveiled a giant UHV construction scheme in May, covering 12 UHV lines, with estimated cost at RMB200bn ($32.5bn).
China’s trans-regional power transmission hit 115.5bn kWh in the first half of this year, rising 14.8% year-on-year. Inner Mongolia was the top supplier, selling 71.7bn kWh, or 18.8%, of the total, followed by Shanxi at 40.1bn kWh, or 10.52%.
Power transmission via the UHV power lines within the 26 provinces under the State Grid reached 47.89bn kWh in the first half of this year, jumping 102.8% year-on-year.
China’s power industry reforms to speed upChINA’S pOweR SeCTOR is expected to embrace a series of deep reaching reforms aimed at breaking the monopolies of the power grids.
It is understood that the National Development and Reform Commission has completed the primary plan and is now collecting opinions from related companies.
According to the draft, power transmission and distribution will be separated.Grid operators will realise revenues only through charging a maximum power transmission fee, instead of earning the margins from differences between on-grid prices and retailing prices.
Currently, China’s power trading is monopolised by the two major power grids, the State Grid and China Southern Power Grid.
The State Grid covers 26 domestic provinces, while the Southern Grid covers Guangdong, Guangxi, Yunnan, Guizhou and Hainan.
These power grids have monopolised the buying, transmission, distribution, and selling of electricity, and blocked the trading of power between power plants and consumers.
Reforms in the sector have been slow in the past decade due to objections from power grids.
It is only lately that resistance from power grids has reduced significantly compared with a few years ago, after Chinese authorities began sweeping reforms on state-owned groups and launched anti-corruption campaigns.
China’s last power reforms took place in 2002, when power generation was separated from transmission. The system created five major power groups and two power grids responsible for China’s power supply.
Offshore wind farm growth gains speed in ChinaChINA IS expeCTeD to see rapid growth in offshore wind power development, with newly-started capacity to soar after the release of the on-grid power prices in early July.
For this year alone, construction on around 1.56GW of units will begin, more than three times the total installed capacity of 0.43GW in late 2013.
And in the three years between 2015 and 2017, 3.55GW of additional capacity is expected.
The accelerated pace of offshore wind power development is thought to be being backed by the setting of China’s first-ever offshore wind power prices by the National Development and Reform Commission on July 7.
According to the policy, the on-grid price of power supplied by
China’s major hydro power plantspower plant Capacity unit Completion
Three Gorges Project 22.5GW 34 2010
Xiluodu Hydro Power Plant, 13.86GW 18 2014
Xiangjiaba Hydro Power Plant 6.4GW 8 2014
Nuozhadu Hydro Power Plant 5.85GW 9 2014
Jinping No.1 Hydro Power Plant 3.6GW 6 2014
Jinping No.2 Hydro Power Plant 4.8GW (3.6GW completed) 8 2015
Source: CCM
Major power lines from southwestern Chinapower lines Type Length Capacity Completion
coastal wind power units built before 2017 will be RMB0.85/kWh ($0.1382/kWh), and that of intertidal wind power units will be RMB0.75/kWh ($0.1220/kWh).
The prices are slightly lower than previously expected, but will still create 8-12% of profits for developers, industrial analysts calculate.
This may be coupled with subsidies from local governments. For example, Shanghai announced on May 4 that it will subsidise offshore wind power by RMB0.2/kWh ($0.0325/kWh) this year.
This lifted Shanghai’s price of coastal wind power to RMB1.05/kWh ($0.1707/kWh), and the price of intertidal wind power to RMB0.95/kWh ($0.1545/kWh).
China has rich offshore wind power resources, with the figure between 5-25 meters of water standing at 200GW for the whole country. This is equivalent to nine times the capacity of the Three Gorges project, which totals 22.4GW.
But the country began development of the sector late, with the first plant, Shanghai Donghai Bridge, completed in June 2010. Further development was slow due to an absence of specified price levels and immature technology.
The country had planned to reach 5GW of capacity by 2015, and 30GW by 2020, but the 2015 target is very likely to be missed based on the current situation, as the installed capacity stood at less than one tenth of the targeted 5GW as of the end of 2013.
The government is to accelerate the sector, with 17 projects cleared to begin preparations last year.
These wind farms will have a combined capacity of 4.1GW, and are situated mainly in Jiangsu’s Nantong and Lianyungang, Shandong’s Laizhou Bay, Hebei’s Tangshan, east and west Guangdong, as well as Hangzhou Bay, Taizhou and Wenzhou in Zhejiang province.
China’s wind capacity climbs 23% in h1ChINA COMMISSIONeD 6.32Gw wind power units in H1, growing 23% from a year ago, and putting total wind capacity at 82.77GW by the end of June, the National Energy Administration (NEA) said on July 28.
Xinjiang has commissioned 1.39GW, the highest among all provinces, and followed by Shanxi and Shandong, at 660MW and 600MW respectively.
Wind power production for the first half of this year went up 8.8% year-on-year to 76.7bn kWh, the NEA added.
However, the average operating hours of units were 979, falling 113 hours year-on-year. Separately, Yunnan recorded the highest operating rate, at 1,681 hours, while Tianjin’s performance was 1,332 hours, and Sichuan at 1,294 hours.
The release also posted China’s average wind power waste at 8.5% in H1, down 5.14 percentage points from the same period a year ago.
STeeL INDuSTRy
Chinese steel prices remain at low levelsChINA’S STeeL pRICeS remained at their current low levels, despite being under the pressure from strong production rates and weak demand. However, the country’s demand for steel has started to show
signs of improvement recent, with numbers moving up slightly.The price of spot HRB400 rebars stayed at RMB3,100/t ($504.07/t)
in Shanghai on July 23, up just RMB30/t ($4.88/t) from RMB3,070/t ($498.38/t) on June 23, which marked its lowest point over the past eight years since 2006.
Continued rising steel production has exerted great pressure on the market prices, with the country’s crude steel output hitting an all time high output of 2.31mt/day in June, rising from 2.27mt/day in May, and 2.16mt/day in June last year, based on the data from the National Bureau of Statistics.
The production may have expanded further in July, with the China Iron and Steel Association forecasting a growth of 2.04% in early July compared with end-June.
Fortunately, China’s overall demand for steel has started to improve, on the back of the government’s incentive measures.
The PMI index released by National Bureau of Statistics showed the reading for the steel sector had risen to 48.3% in June, up 1.9 percentage points from the previous month, although remaining below 50% for the second straight month.
The new orders index for the sector also jumped, up to 50.7%, a rise of 4.9 percentage points from May. The export orders index, in particular, stood at 55.7% in June, rising 4.1 percentage points from the previous month, and marking the third month above 50% in a row and the highest in the past seven months.
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price of 16-25mm hRB 400 rebars in Shanghai (RMB/t)
Stocks at major steel markets reflected the same scenario as these indicators, with the tonnage of rebars surveyed by custeel.com falling to 5.87mt on July 18, versus 6.05mt on June 27, 6.64mt on May 30, and 8.18mt at end-April.
Analysts expect the market to improve mildly in the next few months, as construction of railways accelerates. But for the long term, the outlook may remain bearish, given ongoing weak fundamentals and overcapacity in the sector.
Chinese steel mills’ profitability worseningThe pROFITABILITy OF China’s steel companies has continued to worsen, entering into a ‘zero-profit’ era, according to Wang Liqun, deputy secretary general of the China Iron and Steel Association (CISA), speaking on July 24.
Some 88 major steel companies incurred a deficit of RMB4.07bn ($662m) from steel business activities in the first five months of the year, which is RMB2.76bn ($449m) higher than the level from January-May 2013. Sales margins were down to just 0.12%, down 0.1 percentage point from the same period of last year, according to CISA’s statistics.
Severe overcapacity is understood to be the biggest factor behind this weak performance, with crude steel capacity hitting 976mt/yr at the end of 2012. Crude steel production, however, was 779.04mt in 2013, elaborated Wang.
Environmental costs are also on a rise, with China set to implement its most stringent environmental law in its history by January 2015, with heavy fines faced by violators, and detention of company leaders in case of severe pollutions offences.
However, the most difficult period for the sector is yet to come, despite the industry currently struggling at the break-even, CISA deputy secretary-general Chi Jingdong has said.
The slowdown in demand from sectors such as real estate, infrastructure, machinery and automotive, amid China’s economic restructuring, is expected to remain bearish in the longer term, further aggravating the sector’s overcapacity, he added.
It’s understood that Chinese commercial banks have tightened new loan shresholds, with most of the steel companies predicted to be unable to obtain sufficient bank financing in the future, while companies are being pressed to make repayments, according to analysts.
Various local governments in China are realising that their capability to help local steel mills out their current financial difficulties is extremely limited, despite producers traditionally being major tax payers and employers.
Insiders expect the situation to worsen rapidly across the sector, resulting in dozens of closures and unpaid debts of at least tens of billions of RMB at each.
More domestic steel mills have been heard to be struggling and on the verge of bankruptcy, after Shanxi-based Haixin Steel shutdown its furnaces in March.
Xilin Steel, the largest steel company in Heilongjiang, is only operating one furnace at current, after its debts hit roughly RMB19bn ($3.09bn) in Q1, versus profits of RMB2.39m ($0.39m) in the period.
The debts of Sichuan-based Chuanwei Group hit RMB27.2bn ($4.42bn) at the end of 2013, jumping 164% from 2011. This contrasts to the company’s assets, which climbed 98.3% to RMB36.2bn ($5.9bn) in 2013.
pRODuCTION & STOCkS
China’s h1 coal production fallsChINA’S h1 COAL production was lower than the same period of last year, due to weaker demand from downstream users and strong hydro power output.
Total output came to 1.82bn tonnes in the first six months of 2014, down 33.1mt, or 1.8%, from H1 last year, according to the China Coal Transport and Distribution Association.
Output of major state-owned mines was 998.89mt, sliding 12.09mt, or 1.2%, year-on-year. Private and local state-owned mines produced 817.11mt, down 2.5%, from 838.1mt in the same period of 2013.
The tonnage produced in June dipped to 298mt from 300mt in May, but the average daily output climbed to 9.93mt from 9.68mt. Compared with June last year, however, the figure dropped 6mt from 304mt.
The statistics indicated that June output from major state-owned mines stood at 168.41mt, up marginally from 168.4mt in May, but down 1.1% from June last year. Private and local state-owned mines produced 129.59mt, which is down from 134.6mt in May and 133.75mt in June last year.
Shanxi remained the top producing province, after surpassing Inner Mongolia in May. The province’s H1 output hit 478.25mt, up 9.32mt, or 2.0% year-on-year.
Shanxi’s June output was 91.54mt, rising further from 88.65mt in May and 78.64mt in April. The five major companies there produced 42.73mt in June, climbing 9.6% from 38.97mt in May
Inner Mongolia mined 451.46mt in the first six months, down 9.3% from the same period of last year, and falling behind Shanxi by 5.93%, or 26.79mt. Output from major mines rose to 425.14mt, up 18.8% year-on-year, while production of private and local state-owned mines plunged to 26.32mt, down 79.4% from 127.49mt in H1 last year.
The region produced 73.98mt in June, down from 74.74mt in May, and down 1.0% year-on-year. Key state-owned mines produced 69.02mt, which is down from 69.92mt in May, but up significantly from 49.53mt in June last year.
Output of private and local state-owned mines remained low at 4.92mt, although up from 4.82mt in May. However, this is equivalent to just one quarter of the 17.42mt produced in the same period of last year.
Shaanxi, the third largest coal producing region, mined 211.32mt in the six-month period, down 12.38mt, or 5.54%, from H1 last year. Key state-owned mines produced 63.73mt, down slightly from 64.55mt in the first six months of last year. Local mines produced 90.16mt, down 13.94mt, or 13.4%, year-on-year.
The province produced 42.89mt in June, after witnessing a strong production of 43.07mt for May. The figure was down 12.38mt, or 5.54%, compared with June 2013.
Shenhua Energy, the listed subsidiary of Shenhua Group, saw its output weaken slightly to 155mt in H1, down 2.1% year-on-year. Production in June was 25.7mt, up slightly from 25.2mt in the previous month, but down 2.7% from June last year.
The company’s sales dropped 3.3% year-on-year to 234.6mt in H1, but its June performance jumped to 47.8mt, soaring 25.8% from 38mt in May, and up 5.5% year-on-year. This was the first increase in the past five months, contributing to the company’s heavy price cuts since June 24.
China Coal Energy, the listed arm under the country’s second largest
producer China National Coal Group, produced 60.48mt in H1, up 2.8% year-on-year. Its production in June stood at 10.4mt, similar to the 10.36mt it recorded in May, but this was a jump of 11.3% from June 2013.
The company’s sales came to 75.13mt, climbing 0.1% years-on-year. The tonnage in June was 13.68mt, declining 7.4% from 14.78mt in the previous month, but growing 3.6% year-on-year.
Inventories at China’s ports start to fallCOAL STOCkS AT major ports in northern China begun to decrease since mid-July, as power groups’ buying interest picked up after the steep domestic price cuts of July.
Inventories at the four coal loading ports in north China, including Qinhuangdao, Caofeidian, Jingtang and Tianjin, dropped to 21.24mt on July 27, down 0.7mt from 21.94mt on July 14.
Stocks at Qinhuangdao port fell to 7.09mt on July 28, down from their latest peak of 7.4mt on July 22, while the tonnage at Huanghua port shrank more rapidly to 1.63mt on July 28, down 0.97mt, or 37.3%, from 2.6mt on June 26. The vessel queue at Huanghua was 43 on July 21, up 17 from 26 vessels a week ago.
The sliding stock levels at ports are understood to be mainly caused by Shenhua’ s six recent price cuts, which reduced its prices of 5,500kc NAR materials to RMB485/t ($78.86/t) on July 22, from RMB530/t ($86.18/t) before June 26.
An expectation of rising consumption has also encouraged power plants to stock more, with coal burn of the major six major power groups, including Huaneng, Guodian, Datang, Yudean, Shanghai Electric Power, and Zheneng Electric Power, rising to 0.68mt/day during July 18-24, up from 0.61mt/day in early July.
Stocks at power plants saw the tonnage at the big six generators dropping to 13.2mt on July 24, down 0.74mt or 7.2% from 13.94mt on July 1. This figure is enough for 19 days of consumption, versus the 23 days witnessed early in the month.
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Inner Mongolia production (mt)
Source: CCM
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Stocks at four major northern ports (mt)
Source: CCM
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Stocks at China’s major power plants (mt)
Source: CCM
TRANSpORTATION
China power Investment to build railwayChINA pOweR INveSTMeNT, a major power generator in China, is to build the second rail track from the Baiyinhua coal mine to Jinzhou port, in order to facilitate coal deliveries from its coal mines in eastern Inner Mongolia.
The planned railway will be 565km long, with total costs estimated at RMB25.66bn ($4.17bn), of which 35% is to be funded by China Power Investment and other joint investors, and the remainder will be sourced from banks.
Construction on the railway is expected to take four years, with commissioning estimated for 2018-2019.
Currently, the railway from Baiyinhua to Jinzhou comprises two parts, both constructed by China Power Investment.
The first part from Baiyinhua to Chifeng is 331km long and was completed in 2009, with a capacity at 20mt/yr. The railway is to deliver 17mt this year, after railing 14mt last year.
The section from Chifeng to Jinzhou port is 282km long and was commissioned in 2010. The railway is still being constructed, with commissioning scheduled in 2015. The railway, at total costs of RMB7.15bn ($1.16bn), will be capable of delivering 60mt/yr.
China’s rail and port handling improves in JuneChINA’S COAL RAILINGS and shipments climbed on a daily basis in June, on the back of rising demand because of higher temperatures and industrial growth, although monthly figures continued to be low.
Total coal deliveries by railways came to 185.4mt in the month, down from 188.73mt in May, but the daily average figure stood at 6.18mt/day, up 1.48% from 6.09mt/day in May, according to the China Railway Corporation.
YTD coal railings amounted to 1.15bn, edging up 0.7% year-on-year.The Daqin line transported 38.94mt in June, down from
40.61mt in May, and its daily deliveries dipped as well, from 1.31mt in May to 1.30mt in June.
But the Houyue line delivered 15.9mt, up from 15.46mt in May. For the YTD, Daqin delivered 224.84mt, rising 2.3% from H1 last year, and the Houyue line railed 92.23mt, up 2%.
A similar scenario was seen with the port figure, with total shipments standing at 57.25mt in June, down 1.92% from 58.37mt in the previous month. However, the daily tonnage averaged at
1.91mt/day, up 1.6% from 1.88mt in May.Qinhuangdao handled 18.53mt in the month, falling 4.8%
month-on-month, but rising 0.3% year-on-year, and Huanghua port shipped 11.69mt, dropping 5% from May.
Total YTD shipments were 339.32mt, up 7.3% from the same period of last year. Qinhuangdao delivered 115.87mt, flat to H1 2013, and Huanghua shipped 67.87mt, rising 8.5%.
OTheRS
yitai to build coal liquefaction in xinjiangINNeR MONGOLIA-BASeD COAL producer Yitai Group has won the go-ahead for a coal-to-oil plant in Xinjiang, with approval handed out by the National Development and Reform Commission in mid-July.
The planned project will be built in Yitai’s industrial park at Kazak autonomous prefecture in Xinjiang’s Yili, with capacity at 1.02mt/yr. Total costs are estimated at RMB19bn ($3.09bn), of which 30% will be funded by Yitai, and the remaining 70% will be financed by bank loans.
The company is inviting bids for required equipment currently, with construction expected to start soon. Commissioning may come in around 2019. The capacity may expand to 5.4mt/yr later, with total spending at RMB78bn ($12.69bn), the company said.
Yitai is running a 0.16mt/yr demonstration project in Inner Mongolia utilising indirect coal-to-oil technology. Production was 0.18mt in 2013.
The company also won approval for another 2mt/yr plant in Inner Mongolia’s Ordos in December last year.
China’s gas demand increasesChINA’S NATuRAL GAS consumption stood at 88.7bn m3 in the first half of 2014, growing 8.9% from the same period of last year, says the National Development and Reform Commission (NDRC). The rate in Q2 was 9.4%, accelerating from Q1’s 8.4%, based on the same statistics.
The country’s natural gas production amounted to 63.2bn m3 in H1, climbing 7.5% y-o-y, while imports were 28.3bn m3, up 14.4%.
Oil retailing giant Sinopec’s oil and gas production was 237.01 million barrels of oil equivalent in H1, growing 8% year-on-year. This included 177.88 million barrels of crude oil, up 7.52%, and 354.8bn cubic feet of gas, growing 9.46%.
For mid-term demand, it is understood that China has entered a ‘golden age’ for natural gas, after the country enhanced its stance to reduce pollution, with gas emerging as a major part of the solution, according to the International Energy Agency (IEA).
China’s gas demand is expected to reach 315bn m3/yr by 2019, an increase of 90% from the current level. This is compared to the overall global demand, which may climb by merely 2.2%/yr over the forecast period, the IEA said.
Chinese production is projected to growth by 65%, from 117bn m3 in 2013 to 193bn m3/yr by 2019, most of which will be unconventional gas. This will help meet some 50% of the newly increased demand, with China to remain a major importer.
Third round of Chinese shale gas auction plannedThe ThIRD ROuND of shale gas resource auctions are being prepared in China, although the Ministry of Land and Resources (MLR) may no longer be the sponsor, according to an insider close to the issue.
Provincial governments will be allowed to hold auction events independently, needing only to report the auctioned blocks to the ministry.
It is understood that a number of provinces have already started making relative plans for the work, with Hubei preparing to auction five blocks this year. Guizhou has also reported similar plans.
China has so far pumped more than RMB15bn ($2.44bn) into shale gas development, with 322 wells drilled by the end of April this year, mainly in the Sichuan Basin and some neighboring areas.
This has seen three companies - Sinopec, PetroChina, and Yanchang Petroleum - achieving production, at a combined capacity of 1.4bn m3/yr, the Ministry of Land and Resources has said.
PetroChina has drilled 50 wells at Sichuan’s Changning-Weiyuan block and Yunnan’s Zhaotong block, of which 10 wells were commissioned, producing a total of 79.22 million m3 so far. PetroChina wants to increase the capacity to 2.6bn m3/yr by 2015.
Sinopec has drilled 23 wells in Sichuan, Chongqing and Guizhou, and produced 300 million m3 by end-April. This year’s production is expected to top 1bn m3/yr, and the figure could stand at 5bn m3/yr by 2015.
Yanchang Petroleum had finished 39 wells as of the end of 2013, with capacity totaling 11 million m3/day.
China has planned to produce 6.5bn m3/yr of shale gas by 2015, and further increase the output to 60-100bn m3/yr by 2020, compared with 200m m3 in 2013.
The country has so far launched two rounds of auctions with 21 gas blocks offered. However, drilling of shale gas wells has been slow, due to technical and financing issues.
Mongolia looks to export gas to ChinaMONGOLIA LOOkS LIkeLy to ink a preliminary agreement with Sinopec on the construction of coal gasification facilities during Chinese President Xi Jinping’s visit to the county in August, Chuluunbat Ochirbat, vice minister of Mongolia’s Ministry of Economic Development, said.
This is after a MoU for the project was inked between Mongolia’s Ministry of Mining and Sinopec in October 2013.
As per plans, the project, at the cost of $30bn, will see the construction of four plants to produce a combined 16bn m3/yr of gas, consuming 50-80mt/yr of thermal coal produced in Mongolia.
Commissioning is scheduled by 2019, with roughly 95% of the production to be supplied to China, Vice Minister for Mining Erdenebulgan Oyun said earlier.
China faces LNG oversupplyChINA’S LNG SeCTOR is facing up to the potential of a severe oversupply situation, with LNG production capacity totaling 51.3m m3/day as of the end of June, up 33% from the end of 2013.
LNG imports have also climbed, by roughly 21% year-on-year in the first five months of 2014, according to industrial sources.
However, demand in the downstream sector has slid, due to the price competiveness for LNG. Roughly 47% of LNG in China is used as fuel for vehicles.
In the major consuming province of Guangdong, YTD LNG station launches stand below 10, much lower than previous market expectation.
The source also expects that some 40.94 million m3/day of additional capacity may launch within this year, increasing the capacity to nearly 100 million m3/day, which will further aggravate the oversupply situation.
Chinese energy structure changingChINA’S eNeRGy CONSuMpTION structure saw a mild change in 2013, following efforts by the authorities in limiting coal use and protect the environment, the BP Statistical Review of World Energy 2014 has indicated.
China’s coal consumption stood at 1.93bn tonnes of oil equivalent last year, up 3.7% from the previous year. This accounted for 67.5% of China’s overall energy consumption, with the proportion falling from 67.8% in 2012, and hitting its lowest recorded level.
Oil consumption went up 3.5% to 507.4mt of oil equivalent, which was 17.8% of the total. The proportion has also narrowed from 17.95% in 2012, and stood at the lowest since 1991.
By contrast, natural gas consumption, which climbed 10.5% to 145.5mt of oil equivalent in 2013, weighed 5.1% of the total, doubling the level of a decade ago. Other non-fossil energies, including nuclear, hydro power and renewable energies, jointly shared 9.6% of the total, compared to 9.3% in 2012.
China’s overall primary energy consumption amounted to 2.85bn tonnes of oil equivalent last year, growing 4.7% year-on-year. This makes the country the top energy consumer in the world, accounting for 22.4% of the global total. Imports have met 15% of China’s energy demand last year, with the rate for oil approaching 60%, while for natural gas it was 30%.
Global energy demand was 12.73bn tonnes of oil equivalent, which was a rise of 2.3%. The growth rate accelerated from 1.8% in 2012, but has slowed from the 10-year average of 2.5%.
COMpANIeS
Shenhua wins green light for Oz mineSheNhuA ReCeNTLy ReCeIveD the go ahead from the National Development and Reform Commission (NDRC) for its Watermark coal project in New South Wales, Australia. The project still needs environmental approval from the Australian government.
The Watermark project, occupying an area of 195km2, with resources at 290mt, is located approximately 25km south-east of Gunnedah and is approximately 282 km by rail from the Port of Newcastle.
Construction will include a 10mt/yr open-cut coal mine for an operation period of 25 years, and an ancillary coal handling and preparation plant to process the raw coal, according to plans.
Shenhua drills shale gas wellsSheNhuA GROup hAS reported progress in its shale gas development, with drilling work started at the Baoye No. 2 well at Hunan Baojing block on June 3, and at the Baoye No. 1 well on July 2, according to the company.
Shenhua took control of the Baojing block during the second shale gas
resource auction held by the Ministry of Land and Resources in 2012; however, progress had been limited because of a lack of experience.
The company has consequently joined up with companies with related experience. In March 2013, an agreement was signed with Norway-based Statoil, while at end-2013, Shenhua also inked a deal with the US-based Energy Corporation of America (ECA) to extract shale gas in Greene county, Pennsylvania.
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