While the news in the US and EU is grim, and the ripple effects are being felt in China, it is stories like Experts expect falling coal market in China on oversupply  that offer something of a silver lining for some (like myself) that feel China has grown too fast.

Mr Li Xuegang vice director of the Coal Transportation & Sales Society of the city said that besides, the decreased demand for coal from power plants can partly blame for piles of resource congested at the port, remaining 8.3 million tonnes. This was a sign of oversupply.

Keeping in mind the fact that coal stocks for the last 2 years have been short, and that there has been an ongoing struggle with energy capacity, this could perhaps be an opportunity for power plants to bring safety stocks up as prices fall and rail capacity improves.

VBS TV has just posted an amazing series on Lifen’s air pollution problems. Shot on scene over a week, this series will give you a clear representation of what challenges China’s growth has brought with it. Personally, while I have not been to Lifen, I have been to plenty of cities that are facing similar challenges, and it is distressing sometimes to get off a plane and literally be able to taste the products that a city produces.

In my mind, I am still scratching my head as to why Lifen and the other 15 cities on the most polluted list do not have programs in place to ensure that all the entities who play a role are being given assistance in paying for technologies, and are then being monitored to make sure they are using the technologies.

It is a problem that can be solved, and it is one that if left to continue will only get worse.With that being said, and with the finger pointed, I would like to also point out that there are solutions and that things are beginning to change, and western consumers themselves have a role in this as well.

With oil shooting through 150 USD a barrel, the cost of transportation has become a factor for many manufacturing in China – particularly those exporting.

Nothing new about that, and it just as that average Joe in the US is getting used to 4 USD a gallon gas, manufacturers are going to have to either get used to paying 30% more trucking charges, find ways to move their manufacturing closer to their customers, or find ways to save without moving.

In China, saving are really there for the taking.  Just consider the fact that China is reporting out 17-20% of GDP as the costs of logistics whereas the US and EU are  in the 9-11%.

On the equipment side,  trucks in China have a real range of size, capabilities and reliabilities.. but if there is one thing they all share, it is the ability to reduce carbon emissions, improve fuel efficiency, and save money.

Which according to a recent article Solutions for the long haul,that highlights a report by the Rocky Mountain Institute on the US trucks:

According to the study, the average Class 8 tractor trailer — the kind of truck you see most often on the Interstate — gets about 6.5 miles per gallon on the highway when fully loaded. RMI Senior Consultant Michael Ogburn thinks that highway mileage could be increased to 12.3 mpg in the next few years with readily available technology.

Particularly interesting about this report is that they have broken down on page 8 the energy usage of a typical tractor trailer in the US (a study of Chinese trucks is sure to yield a vastly different result do to very different aerodynamic conditions).

Primary factors in the energy usage are:

• engine 56% + idling and aux 8%
• aerodynamics 21%
• tires 13%

to read the full report, you can download the full report report here

With so much going on in China, and only a limited amount of bandwidth, I have created this weekly post to highlight articles that I feel are (1) important, (2) relevant, and (3) interesting.

This week there are 3 articles that I have chosen to highlight as each are quite interesting, they are all relevant, and there are issues within each that I think you the reader should be aware of.

If you have an article that you feel needs to be mentioned, please do so in the comments section.

Continue reading »

If you were to just read the popular press, it would be easy to laugh at the term “green Olympics”.  Journalists carrying hand meters taking air measurements, cyclists wearing face masks, and even air quality widgets all provide a bit of comedy to what is the serious conditions that their hyper development has created.

The problems though are much more complex that smog, will continue to be serious issues for the 1.3 billion residents of China, and while the government is taking “draconian measures”to reduce the air pollution, there are a lot of other issues to solve and programs/ technologies that are being put in place as part of this Olympics that will improve the quality of life for 20% of humanity.

Earth to Tech’s article 10 Cleantech Companies Greening the Olympics has stepped out of the smog box to look at 10 firms whose products are part of the larger “green Olympics”.

Ranging from LED lighting, clean water, energy management, and mass transit, the products and technologies highlighted will surely see a huge boost as they leverage the benefits of their programs to Beijing’s residents ongoing.

A couple of weeks ago, I read an article that reported more than 10 provinces were rationing power supplies and I took notice.  I wasn’t alarmed at the time because when I looked at the provinces, they were primarily the outlying provinces, and they were not coastal at the time.

But, that has changed.

Obviously closely link to the coal issues, and the heat, this is also a problem of the speed by which new demand from the consumer and industrial sectors have grown over this last period of 3-5 years.

Most concerning at this point for me is that Hubei is now coal ratios, and even Wuhan is having to cut their energy by 30%. This is in addition to Shandong has now been asked to ration energy consumption to ensure the Olympics have enough juice, Anhui is 1GW short of their 15GW need, Shanghai’s A/C bills are beyond the power grids capability

According to one article, the shortage is 14 GW for July alone, and as of July 15:

There are 198 power plants with stockpiles to last less than seven days and 69 plants with enough coal for less than three days, and 53 plants that were forced to shut down because of the lack of coal

As we have seen, the coal issue has only grown worse, and China is left with few solutions to cover the short term issues.

Continue reading »

Last night I met up with a friend and we were running through the recent coverage of China’s coal problem, and while hashing out some of the seemingly conflicting issues (pricing vs. exports vs. rail capacity), I/ we ended up running through a scratch pad analysis of a few different scenarios.

using the image above as the “scratchpad”, we worked through a few items:

1) For the last 18 month, there has been a lot of coverage on China’s rail network not having the capacity to move coal (black circle) to Guangdong (red dotted line).  I have covered this regularly, and it is what most point to as one of the core issues of ongoing power shortages.  there have been efforts to offset by importing coal into the province from Australia and other countries as it is supply chain wise the only way to ensure coal deliveries.

2) Recently there  was a story on BBC that a new problem has formed, that rather than ensure domestic deliveries, coal is being exported for higher profit.  Something that occurred earlier this year with petro, this is purely a problem of the central government allowing the domestic to international gap to grow too wide through their efforts to curb inflation and cap energy prices.

Continue reading »

Last week the new Energy Administration was launched, and it really could not have come at a more critical time.   China’s power producers have been short of coal for a while as rail capacity issues hampered their ability to deliver much needed reserves, and while the lights have stayed on for the last 6 months in Shanghai we are hearing about critical shortages in Guangdong and other areas.

reported on more frequently, these coal shortages are apparently are now a lot more complicated as China’s practice of setting price levels at the NDRC have created an arbitrage opportunity that coal mines cannot resist.  Exporting their coal to the world market.

Where this story would be interesting to is in the details.  (1) Are we talking the same coal – thermal, coke, etc – being exported as is needed domestically (2) Are exports impacting deliveries to the hardest hit areas, or is this overstock that never couldn’t possibly be delivered anyway because the line from Shanxi to Guangdong is overcapacity anyway

this is a condition that  we saw in the petro market earlier this year, and it is interesting to see it occur in the coal market, but either way it shows that while Beijing may set prices there is a limit to these bands.. and that there are short and long term consequences to trying to defend a gap that is too wide without properly subsidizing firms.

To learn more about China’s Energy situation, you can see my previous posts here

Just a quick update that is being provided by Shanghai Daily and FT on Beijing’s plans to clear the air.

According to the article:

If the air quality for the next 48 hours is still unacceptable because of “extremely unfavorable weather conditions,” cars whose number plate’s last digit matches the last number of the date will also be banned, according to the Ministry of Environmental Protection.

Work on all the building sites will be suspended and the city will ban production at another 105 electronic, chemical, furniture and construction material factories during the Games.

In Tianjin, 56 coal-fired power plants will be affected by the plan. In Hebei 51 plants will be affected and small steel plants would have to cut production significantly.

So, for those of you who are in Tianjin or Hebei, and thought you were safe, you should look out the window, assess the smog levels, and make the necessary phone calls to suppliers and logistics providers.

A reoccurring theme over the last 18 months has been the shortage of coal.

The first big blowout came during the snowstorm in Febrary, 2 months after China began turning around boats to retrofit them to carry coal, and 6 months after Guangdong was suffering rolling blackouts.

since then, we have had the Guangdong governor issue a letter saying they were short 20%, , power generators were loosing money hand over first,  a couple of weeks ago you had everyone hitting energy usage records, and Chongging (a major benefactor of the 3 gorges dam) had to ration power

With that, here are some new articles that only reinforce the point that China has hit a wall from China Environmental LAw , Xinhua, and Caijing: their rail capacity is tapped, there are no more boats, the drought has continue, the Olympics are coming, and it is HOT.

For me, the situation is now reaching a stage where I am having daily conversations about the situation, and it is a situation that will only continue to get worse.  We are not in the heat of summer yet (only a few days at best), the Olympic will remove small coal plants up north from the grid, the Olympics will increase the load on the grid, and it is not like there is a lot of rail capacity that is going to suddenly make itself available.

My 2 cents – buy coal contracts, investing in commodity shipping companies, and pray that we make it through the big “O” without any major problems.

My plans – hold another What if, What Else, What are the Odds session ASAP, and pursue a few leads on companies I am profiling for my latest venture