China’s port restrictions cause berthing disruptions

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A wave of stricter port restrictions in south China has left steel producers searching for alternative ports to allow them to berth vessels carrying their imported metallurgical coal cargoes.

A south China steel producer, which typically berths its vessels at Fangcheng port, has been prevented from doing so. An east China steel producer has been trying to get clearance to berth a cargo of Australian premium mid-volatile metallurgical coal at Wenzhou port in Zhejiang province but has now been denied entry. Both steel producers are scrambling to find an alternative. Another south China steel producer might be barred from taking any more imported coal in the following months as port import quotas have nearly been reached, sources said.

“For Chinese steelmakers, especially those in the south, it is no longer a matter of prices but of which ports will actually allow them to berth,” a China coal sales manager said. “At the moment, Jingtang port in Hebei province is stocked full with cargoes, as it is one of the few ports that actually allow vessels to berth and unload with minimal disruptions.”

Trading firms have been particularly disadvantaged by these new restrictions. At Rizhao port in Shandong province, Chinese customs have allowed trading firms to unload cargoes only if they can provide proof that the cargo will eventually be sold to a buyer. “They are essentially preventing traders from stockpiling cargoes at the port,” a Zhejiang-based trader said. “At the same time there have been limits placed on trader sales. Traders can only offload and offer cargoes in the port that they are based in, instead of offering from various other ports, which limits the number of sales options that they have.”

At least two to three cargoes of distressed premium mid-volatile hard metallurgical coal are currently held by Chinese trading firms, being offered in the spot market at huge discounts in a US$184 – 185/t cfr China range as they struggle to find a home. In contrast, the current Argus assessment for premium hard low volatile metallurgical coal loading in the normal 15 – 60 day window is US$199.60/t cfr north China.

These port restrictions are not new but have been escalated. Since last year steel producers and trading firms were already reporting a spate of measures imposed by Chinese customs in an attempt to reduce coal imports into China. This includes restricting the clearance of coal cargoes with high sulfur or ash content on grounds of environmental protection and extending the time required for cargoes to obtain clearance from customs officials, among other limitations. Ports have also imposed annual volume quotas for coal imports. Once these quotas are exceeded buyers will not be allowed to import metallurgical coal for the remainder of the year.

These measures are aimed at indirectly discouraging Chinese buyers from importing coal from overseas. “An outright ban will be a bad idea because it opens the government up to criticism,” a Chinese trader said. “So, these indirect methods are best.”

The restrictions have added to the woes of Chinese metallurgical coal buyers, which have already been hit by higher import costs as a result of a depreciating Chinese yuan after continuing trade tensions between US and China hit sentiment in foreign exchange markets.

Typhoon Maria is also forecast to batter east China for most of the day up until 12 July. But some ports in the region, including Shanghai and Zhoushan, have remained open and are largely unaffected.

Source: WORLD COAL

Vostochny port handles record coal in 1H18

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Vostochny port, a stevedoring comoany in Primorye (Russia), handled 12.3 million t of coal in the first half of 2018, 5% more than in the same corresponding period in 2017.

This is reportedly an all-time record for the company which specialises in handling coal for exports.

This year, Vostochny port shipped coal to South Korea, Japan, Taiwan, China, Malaysia, India, Pakistan, Thailand, Vietnam and Singapore.

The company unloaded 161 400 gondola cars of coal in the first half of 2018, including 125 600 or 78% innovative gondola cars with increased capacity. The company handled 288 vessels.

Source: WORLD COAL

Growth in South Eastern Railway’s freight earnings

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During the first three months i.e. April-June of current financial year (2018-19), South Eastern Railway has earned Rs. 3121.58 crore from originating freight traffic which is Rs. 235.53 crore more than the corresponding period of last year i.e. 2017-18 thus registering a growth of 8.16 %.

This growth in freight earnings has been possible due to increase in freight loading during the above period. Coal loading during April-June of the current financial year has been 8.10 million tonnes which is a growth of 61.35% in comparison to the corresponding period of last year surpassing the Railway Board’s target by 5.88%. The other major components of freight loading were 18.71 million tonnes of Iron Ore, 3.75 million tonnes of Pig-Iron & Finished Steel, 2.94 million tonnes of Cement, 1.20 million tonnes of Merchandised Goods etc.

South Eastern Railway’s total freight loading during April-June of the current financial year has been 36.49 million tonnes as against 35.95 million tonnes loaded during the corresponding period of last year recording a growth of 1.50%.

Source: THE ECHO OF INDIA

Brazilian cement demand falls 20% in May

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Brazil’s cement market contracted by 20.3 per cent YoY in May from 4.503Mt to 3.588Mt (excluding imports), according to the latest data published by SNIC, the country’s cement association.

In the southeast, the largest market in the country, sales fell 17.5 per cent to 1.729Mt from 2.095Mt in May 2017. In the northeast sales decreased 23.2 per cent from 940,000t in the equivalent year-ago period to 722,000t in May 2018. A 20 per cent decline was recorded in southern Brazil with sales down to 591,000t from 739,000t in May 2017. In the central-western part of the country the drop was the largest at 25.3 per cent YoY to 378,000t while in the north, Brazil’s smallest market, volumes fell 24.7 per cent YoY to 168,000t.

SNIC has attributed the drop in sales on the road transport strike and subdued economic activity. Previously, the sector was anticipating 1-2 per cent growth for the year, but the strike and its repercussions throughout the supply chain combined with weak economic activity has led to predictions of a market contraction, according to Paulo Camillo Penna, SNIC president.

Exports advanced by 60 per cent from 5000t to 8000t in May 2018.

In the first five months of 2018 domestic sales (excluding imports) declined 4.5 per cent to 20.42Mt from 21.379Mt in 5M17. In the southeast and south sales slipped by some 2.4 per cent to 9.827Mt and 3.429Mt, respectively. In the central-western part of Brazil sales fell 5.1 per cent YoY to 2.057Mt in 5M18. The northeast saw volumes sold decrease by 9.4 per cent to 4.191Mt YoY while the north reported the largest decline at 9.8 per cent to 916,000t.

As the domestic market experienced a downturn, cement producers sought solace elsewhere and exports increased by 5.7 per cent from 35,000t in 5M17 to 37,000t in 5M18.

Source: CEMNET

Kenya’s cement consumption falls to 1.4Mta in 2Q18

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Cement demand in Kenya has fallen to 1.4Mta in the second quarter of the year, according to a report from the Kenya National Bureau of Statistics (KNBS). The agency attributes the drop to a continued slowdown in real estate activity.

In the first quarter of 2017 domestic cement consumption reached 1.5Mt but has since decreased. Furthermore, the continuing decline was also reflected in a 15.7 per cent drop in cement imports as well as in an eight per cent fall in clinker imports during the first quarter of the year.

The market contraction has affected several cement producers in the country. Athi River Mining (ARM) dismissed 700 staff last year as it noted a US$65m loss. East African Portland Cement reported a US$15m, the first since 2014, while market leader Bamburi Cement’s profit shrunk by a third to US$20m.

Source: CEMNET

Cement cos’ profits likely to crumble under cost pressure

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Despite a robust demand, cement companies’ profits are expected to come under pressure in June quarter due to a sharp rise in input costs especially that of pet coke and diesel.

Led by a sustained pick-up in infrastructure spending and firm rural demand, sales volume of top cement producers such as UltraTech Cement, ACC, Ambuja Cement, Shree Cement, JK Cement, JK Lakshmi Cement, India Cement and Ramco Cement are expected to register an average 20 per cent growth in the June quarter.

Input costs rise

However, the average cement prices during the quarter was down five per cent year-on-year even as cost pressures increased due to high energy prices and depreciating rupee.

The all-India average cement prices declined by ₹3 per 50 kg bag to ₹328 in June, after a ₹4-5 increase in the previous two months.

Petcoke prices have been increasing for the last 15 months and cement companies have managed to pass on the incremental cost partially by hiking cement prices.

However, after a certain level they were not able to increase prices due to excess supply in the market. The sector is bogged down by excess capacity.

Binod Kumar Modi, Senior Research Analyst, Reliance Securities, said further hike in cement prices looks imminent to sail through high cost pressure, as any meaningful reduction in fuel prices seems unlikely in the medium term.

To tide over the rising logistics cost, cement companies have changed commercial terms on freight to FOB (free on board) from ex-factory. Under the new terms, cement dealers are made to share logistic costs and this improved cement companies margins in the last quarter.

Monsoon progress crucial

Going ahead, a normal monsoon is important to sustain demand in rural regions which has seen construction activities reviving in the last couple of months.

While progress of the monsoon was moderately below normal last month, it has recovered and has been widespread across the country which bodes well for cement demand, he said.

Capacity addition

Pritam Deuskar, Fund Manager, Bonanza Portfolio, said the industry is expected to add about 126 million tonne production capacity to take the overall capacity to 600 mt by FY20.

The capacity addition is being largely led by UltraTech Cement, Dalmia Bharat, JK Cement and Ambuja Cement.

With the current capacity utilisation hovering at 72 per cent, the new capacity addition may be delayed by a few months but it will add more pressure on cement companies.

Source: THE HINDU BUSINESSLINE

Dalmia Bharat Cement eyes premiumisation; acquisitions on radar

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Dalmia Bharat Cement may soon abandon the mass cement segment as it tries to move up the value chain with premiumisation while weighing options on organic and inorganic growth to enter newer markets of North India. “Premium and super-premium cement brands account for 60 per cent of revenues and in the next two years it would rise to at least 80 per cent. Ideally, we will go 100 per cent,” Dalmia Bharat Senior Executive Director Marketing B K Singh said. He was in city to launch a new premium cement brand ‘Dalmia FBC’.

The company is currently present in East, Northeast and South India. “It has been the objective of this company to emerge as a pan-India player and not limit itself to certain geographies,” Singh said.

With the fate of Binani Cement hanging in the balance, Dalmia Bharat Cement had not ruled out options of acquisition of other cement companies or units for the North India foray.

We had been trying to enter north (India) and attempt for Binani was a step towards that, Singh said.

The company, however, declined to divulge alternate plans for foray into the northern Indian market if its bitter legal battle with UltraTech under the Insolvency and Bankruptcy Code to win over Binani Cement fails.

The company’s consolidated production capacity stands at 26 million tonne per annum (mtpa) but is limited to south, east and the northeast.

If Dalmia Bharat Cement wins over Binani Cement, it can open a readily available market comprising Rajasthan and Gujarat for the company giving it a sizeable presence with its 6.25 mtpa cement plant in Rajasthan. Acquisition has been a key strategy for the company in scaling up its business as well as enter new geographies.

Last year, it acquired only integrated clinker capacity in Bihar Kalyanpur Cements, marking its foray into the state.

As of now, Dalmia Bharat is the only cement company which owns at least one plant in each of the four key eastern states of West Bengal, Bihar, Jharkhand and Odisha.

“We command a 15 per cent market share in the east making it the second largest cement company in this zone while its consolidated market share in South India stands at 11-12 per cent,” Executice Director, sales and marketing (east) Indrajit Chatterjee said.

Its bid to enter the west Indian cement market has also been successful after it acquired the three million tonne stressed assets of Murli Cement which is expected to open up the Maharashtra market for the company.

Both the acquisitions could be ready by the third quarter of this year, the company expects.

Source: PTI

US coal production dips 11.7pct drop year to date – EIA

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Weekly US coal production totaled an estimated 13 million short tons in the week ended July 7, down 11.1% from the prior week and up 4.1% from the year-ago week. Energy Information Administration data showed that this was the highest week-on-week drop year to date, followed by the week ended June 2, which saw a 10% decrease. It was also the second lowest week of production all year, since the week ended January 6.

For the recently-concluded week, coal production in Wyoming and Montana, which is mostly made up of production from the Powder River Basin, totaled an estimated 5.9 million short tons, down 8.6% from last week and down 2.2% compared with the year-ago week.

On an annualized basis, production in the two states would total 335 million short tons, down 4.5% from last year.

In Central Appalachia, weekly coal production totaled an estimated 1.6 million short tons, down 14.1% from last week and up 21% from last year. Annualized production would total 97.3 million short tons, up 6.2% from 2017.

Weekly coal production in Northern Appalachia totaled an estimated 1.7 million short tons, down 13.8% from last week and up 8.2% compared with last year. Annualized production would total 100.5 million st, down 4.3% from last year.

In the Illinois Basin, weekly coal production totaled an estimated 1.4 million short tons, down 16.2% from last week and up 9.1% from last year. Annualized production in the basin would total 102 million short tons, down 1.3% from 2017.

Through the first 27 weeks of the year, US coal production totaled an estimated 389.8 million st, and would total an estimated 750.7 million short tons on an annualized basis, down 3% from last year.

Source: PLATTS

China June coal imports jump 18 percent as utilities speed buying

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China’s coal imports in June rose 18 percent from a year ago to 25.47 million tonnes, according to customs data on Friday, as utilities went on a buying spree to shore up electricity generation.

June’s imports also rebounded from 22.33 million tonnes in May, the data from the General Administration of Customs showed, after traders said China relaxed customs checks to let in foreign supplies.

Robust imports led to higher inventories at port and power plants, easing worries that China’s electricity output might not be able to meet surging demand from provinces such as Hebei and Shandong due to hot weather.

Major Chinese cities such as Wuhan in Hubei and Hefei in Henan province last month reported heavy loads on their power grid and indicated that they might started rationing electricity.

In the first half, coal imports rose to 146.19 million tonnes, up 10 percent from a year earlier, data showed.

Source: REUTERS

China June coal output dips to lowest since October

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China produced 298 million tonnes of coal in June, down 1.4 percent to an eight-month low, the National Bureau of Statistics said on Monday, as government checks on heavy industry aimed at cutting pollution curbed mining of the fuel.

Year-on-year output was up 1.7 percent, the bureau said.

Output over the first six months of the year reached 1.7 billion tonnes, up 3.9 percent compared with the same period of last year.

In recent months, miners have ramped up output as heatwaves across southern China and strong growth in power consumption in industrial sectors fuelled demand for coal-fired power.

The production of coke used in steelmaking fell 4.7 percent in June to 36.13 million tonnes, with year-to-date output reaching 212.0 million tonnes, down 3.2 percent.

Source: REUTERS