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China's easing coal appetite - UOB

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 28, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Analysts at UOB Group explained that according to the deputy secretary general of the China Coal Industry Association., Mr Xu Liang, China’s coal demand is forecast to fall 2% in 2016, for a third consecutive year as industrial output slows, and thus adding force to President Xi Jinping’s drive to cut overcapacity while dimming the hopes of global miners for an uptick in demand by the world’s biggest consumer.

    Key Quotes:

    "Output by the world’s largest producer will also fall by 2%. Consumption has weakened amid a push to use cleaner fuels and shift a slowing economy away from heavy industry. Demand for coal, which accounted for 64% of the country’s total energy use last year, contracted 3.7% last year, following a 2.9% decline in 2014.

    China’s easing coal appetite has helped push prices in Asia to their lowest since 2006, punishing mining companies and prompting the government to propose capacity cuts that threaten the jobs of 1.3 million coal miners."

    "By cutting capacity in the next two to three years, production could fall to about 3.5 billion to 3.6 billion tons, balancing supply and demand. The country aims to eliminate as much as 500 million metric tons of coal capacity by 2020, almost 9% of its total.

    Coal output dropped 3.3% to 3.75 billion metric tons last year, while consumption slipped to 3.965 billion tons, both sliding from record highs in 2013. Use of the fuel in power generation dropped 6.2% last year, while demand from industries including steel, cement and glass making declined."
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