WRAPUP 1-Coal industry looks past Japan dip as Asia demand booms
NUSA DUA, Indonesia
NUSA DUA, Indonesia May 31 (Reuters) - Coal producers in Indonesia and Australia are racing to ramp up output to capture Asia's booming demand for power that has quickly filled the gap left by a drop in demand from quake-hit Japan, executives at a conference said on Tuesday.
Exports of coal from Indonesia, the world's top exporter of thermal coal used to fuel power stations, were diverted to China in the wake of Japan's devastating earthquake and tsunami in March, showing the hunger of the rest of Asia to soak up available spot cargoes.
With Japan's economy showing more signs of recovery on Tuesday, coal industry players at the Coaltrans Asia conference in Bali, said prices could pick up in the second half of the year and producers were competing to be ready for rising demand. [ID:nL3E7GV0QI]
"If there are constraints like the rains last year, if that happens next year, the supply-demand balance will be destroyed. But if the production side is okay next year, then the market will be balanced," said Masato Uchiyama, director of energy business at J-Power , operator of several large coal-fired and hydropower stations across Japan.
Australia suffered serious floods and Indonesia had heavy rains through the year, which crimped coal production.
Uchiyama told Reuters that there may be some bottlenecks to the supply side due to disruptions to ports and new coal mines starting operations.
"But the demand side is very steady. For example, in India, there are many power plants coming online, demand is increasing very steadily -- it's very sure. China is a little bit tweaky, but basically coal demand is to the upside," Uchiyama said.
Japan's industrial output rose 1 percent last month, after a record plunge following the quake and tsunami, and companies said they planned to further crank up output in May-June.
"Next year, definitely Japan must come back... As a coal producer, I'm expecting a deficit," said Eko BF Natalina, sales general manager at Indonesia's Berau Coal , which aims to boost output by half by 2014.
For now, Uchiyama told the conference the firm has cut its estimate for thermal coal demand from Japan this year by only 10 million tonnes to 110 million, taking into account a recovery of demand by power plants that were not damaged.
Australia's thermal coal prices have fluctuated since the earthquake as demand from Japan, Australia's largest thermal coal customer, has eased.
Thermal coal on the globalCOAL Newcastle index for the week to date was $117.50 per tonne on Monday, down from $120.69 a week earlier, and much lower than the $140 a tonne seen in January when prices were pushed up by flooding in Australia's eastern Queensland state.
PRODUCTION, DEMAND INCREASE
The high prices and bullish demand projections from Asian countries that are overhauling their power supply are leading Indonesian producers to keep raising output each year.
Indonesia's Adaro Energy expects 2011 coal production up 5 million tonnes from last year to 46-48 million tonnes, and then to nearly 50 million in 2012, while Bayan Resources is aiming to more than double its output to as much as 25 million tonnes by 2013.
Indonesia is expected to make up 39 percent of the global increase in coal exports, with Adaro and top miner Bumi Resources becoming two of the top three exporters by 2015. Australia will follow closely behind in terms of growth.
India will surpass Japan as the leading buyer of Indonesian coal this year, the country's coal association told Reuters, and India's demand will continue to surge as electricity demand is expected to rise 56 percent by 2017.
China will now face stiff competition from India for Indonesian coal. Coal India , the world's top coal miner, is in talks to buy up to 40 percent of Golden Energy Mines in Indonesia, where Chinese firms have struggled to buy mines.
"This year we're expecting more than 45 percent of our production will go to India and China. I'm fairly confident that these two countries will lead demand in the future," said Berau's Natalina.
Executives at the conference said on Monday that top coal consumer China should see import demand more than double in the next four years and India would be close behind as both snap up supplies to feed rapidly growing power industries. [ID:nL3E7GU1F4]
While India and China's power needs are well known, the conference heard other fast-growing nations in the region are also planning sizeable coal demand increases, likely a reflection of the high price of diesel, unreliability of hydro and start-up costs of nuclear.
Vietnam's Tan Tao Energy Corp sees coal demand in the country increasing to more than 100 million tonnes by 2025, and will likely look to Australia, Indonesia as well as Russia and Colombia.
For South Korea's East West Power (EWP), the higher price of coal means it is looking to increase imports from the United States to diversify its supply from Indonesia and Australia. South Korea also has a long-term plan to reduce coal use in its energy mix. ID:nL3E7GV14P] (Writing by Neil Chatterjee; Editing by Sambit Mohanty and Ramthan Hussain)
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