Friday, March 14, 2014

China: Iron and Coal

From Bloomberg:
Iron ore extended its decline into a bear market, slumping by the most since August 2009, amid concern that demand in China is slowing just as rising output signals a global glut. 
Ore with 62 percent content delivered to Tianjin fell 8.3 percent to $104.70 a dry ton, the lowest since October 2012 and the biggest drop in more than four years, according to data from The Steel Index Ltd. yesterday. The benchmark price lost 27 percent since Aug. 14, when it reached a five-month high of $142.80. The raw material dropped into a bear market on March 7. 
BHP Billiton Ltd. (BHP) and Rio Tinto Group predict lower prices this year after producers in Australia and Brazil spent billions of dollars to expand output. Banks from Citigroup Inc. to UBS AG predict a global surplus, and Goldman Sachs Group Inc. listed iron ore among its least-preferred commodities for 2014. A surge in stockpiles at China’s ports spurred speculation that the inventory overhang threatens imports.
The Chinese Yuan to the US Dollar:

The council represents the largest, primarily state-owned power generators, and Liu issued his warning at the annual Coaltrans China conference. 
Competition from clean energy, including hydro, nuclear, wind, solar and biomass power, will keep the annual growth of coal-fired power - and thus demand for coal - well below 5 per cent in the coming decade, compared to 11 per cent in the previous one, he said. 
"In the next three to five years, power-station coal demand will be weak. The years of long-term tight coal supply will not reappear," he said. "We will have a structural over-supply of coal-fired power. The main driver for coal demand and price will no longer be total power demand, but rather natural gas development policy and rainfall patterns for hydro power."
Coal will still be largest energy source in China for the remaining decade and will also be a dominant driver of energy production elsewhere in the world.  However, natural gas projects in Central Asia will provide China with the first steps in achieving clean energy production.  And there is a 9,000 km pipeline to bring it to residents of Hong Kong:
The project cost 142 billion yuan (HK$178.8 billion) and is operated by the China National Petroleum Corporation. From this summer, it will provide a new source of gas to Hong Kong, replacing the supply the city has been drawing from Yacheng near Hainan Island since 1996 and which is now nearly exhausted. Work on the gigantic project began in 2008. A little over three years later, the main trunk went into operation across the mainland and in August last year the Guangzhou to Shenzhen stretch went live. Now, after a huge engineering effort, Hong Kong is about to join the network.

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