7.29.2012

Heavy rainfall cut China's coal demand significantly

Heavy rainfall has hurt China recently. Huge precipitation on the other hand boosts hydroelectricity output over the country. The higher hydroelectricity supply seems to be reducing thermal power generation amid sluggish growth of electricity demand.

Chinese total electricity supply in June was 393 billion kilowatts hour, flat from a year ago, according to the National Bureau of Statistics. Hydroelectricity rose 19.4% from a year earlier to 75 billion kWh in the month, while thermal power decreased by 4.2% on year to 295 billion kWh.


China's total electricity supply in the first half of this year rose 3.7% from a year ago to 2.3 trillion kWh, thermal power increased only 2.9% on year to 1.9 trillion kWh and Hydroelectricity surged 9.9% on year to 291 billion kWh.

Recent slump in thermal power is apparently affecting on coal prices.
Chinese thermal power plants mainly use coal as their fuel. Domestic prices of coal for thermal power generation was RMB 808 per tonne at the end of 2011. The price had fallen by 13% to RMB 702 per tonne through the first half of this year, then slipped by further 10% to RMB 631 per tonne in July.

China added 4.2 million kilowatts of new hydro electric generation facilities at its Three Gorges Dam in early July. The world largest hydroelectric plant is now operated at 22.5 million kw of designed full capacity.

China's hydroelectricity output seems to increase further in July, due to the added capacity and ample water supply. It is likely to reduce thermal power outputs further.

Electricity supply shortage caused turmoil frequently over the past few years in China since supply capacity had failed to catch up with faster growth of demand. Surges of diesel oil demand for on-site power generation were triggered by the power supply disruptions, but situations in the nation seem to have been changed at all.

7.22.2012

China energy use has become recession pattern

China's gross domestic product in the second quarter was 7.6% on year, the first time below the 8% target after 1Q 2009. The year-on-year growth of the secondary sector of industry was also slowdown to 7.6%.

Growth rate of the secondary sector which is accounting for about half of China's GDP, is usually higher than GDP total rate.


But the growth rates of the manufacturing sector were lower than the total GDP growth between 3Q 2008 and 1Q 2009 when economic recessions hit China following the Lehman shock.

Although Chinese growth rates rebounded from the previous slump, recent figures are shrinking again. The secondary industry sector's growth rate is likely to be lower than total GDP growth again in the near term.

Lower activities in the manufacturing sector are shown in the energy consumption. Year-on-year changes in monthly crude oil processing and electricity output in China are seen in the below chart.


Growth of energy use had declined to the negative area after the Lehman shock, however, economic stimulus with 4 trillion RMB by the Chinese government led the country's energy demand to recover sharply.

Although growth of Chinese energy consumption were stable during 2010 and mid-2011, it has become weaker again over the past few months. China's crude oil throughputs were lower than a year ago in the past three consecutive months.
Growth of the nation's electricity generation was flat from a year earlier in June, while the largest power supply source, thermal power generation recorded year-on-year decrease during April and June.

Slowdown of growth in Chinese energy consumption is not so significant when only one of petroleum or electricity shows slump, but simultaneous decline of both of them represents the serious situation.

Recent growth pattern of Chinese energy consumption seems to be same as that in the recession period. It suggests activities in Chinese manufacturing sector are shrinking rapidly.

7.15.2012

Hormuz shutdown to cause electricity panic in Japan

Tensions over the Iran's nuclear development has been a factor to cause turbulence in the global energy market.

The strait of Hormuz might be closed in case of military conflict, it means suspending transportation of 17 million barrels per day of crude oil from Persian Gulf nations.

Some Persian Gulf nations such as Qatar and the United Arab Emirates are also known as major suppliers of Liquefied Natural Gas.

Japan has been eager to gather LNG for thermal power generation after suffering the severe earthquake in March 2011, in order to make up for the nuclear power shortage. The biggest part of the urgent LNG supply to Japan has been from Persian Gulf nations.


Japan's monthly LNG imports from the Persian Gulf area had been around 1 million tons prior to the earthquake. Those were based on long-term contracts held by CHUBU Electric Power Company, Tokyo Electric Power Company and some other utility firms.

Qatar decided straight away following the quake to supply extra 4 million tons of LNG to Japan over a year. Then additional shipments boosted Japan's LNG imports from Persian Gulf area significantly. It reached to 2.24 million tons in March 2012 when imports from the region accounted for 27% of total LNG imports by Japan.

Although the quantity from the Persian Gulf has calmed following the end of urgent shipments from Qatar, recent import figures are still over 1.5 million tons. Additional imports on 1 million tons per annum of new long-term contract between TEPCO and Qatar are scheduled to start in August.


The graph of Japan's LNG imports by origin describes that shipments from traditional main suppliers such as Southeast Asia and Australia have not increased after the earthquake despite stronger demand. The additional LNG supplies came from Persian Gulf, Russia, Latin America and Africa etc.

Japan imported LNG from 13-14 countries before 2010, but the number of exporting nations increased to 17 in 2011 then has risen to 20 in 2012.

Despite the diversification of supply sources, the most reliable supplier in case of emergency is Qatar which holds an annual 77 million tons of production capacity. Therefore, Japan's LNG dependence on the Persian Gulf area is unlikely to be less in the near term.

If Iran shuts the Hormuz strait, about 1.6 million tons per month of LNG supply to Japan will cease. Since the frequency of LNG tanker's departure toward Japan is every other day, even very short interruption could cause serious effects.

The suspended LNG is equivalent to about 500 thousand bpd of petroleum in order to generate same amount electricity. Japanese 10 major electric power companies used 470 thousand bpd of petroleum in total in June. Their historical record consumption of petroleum was 730 thousand bpd. We can imagin how the 500 thousand bpd of sudden additional demand causes turmoil in the market.

Meanwhile, LNG storage capacity in Japan is about 7.1 million tons which includes storage for city gas supply. If half of the storage capacity is used for electricity, domestic LNG-burning thermal power units could use up within 20 days in case of the high electricity demand period during summer and winter.

Especially, CHUBU is likely to be faced power blackout because 60% of its thermal power units use LNG as fuel and the company relies on Qatar for more than half of LNG supply. The company cannot restart its Hamaoka nuclear power plant over couple of years and its petroleum-burning units do not have enough supply capacity.

7.08.2012

Recovery of Japan's energy use has disrupted

Energy demand has started to decreasing again in Japan.
The country's weekly crude oil processing showed recovery between March and early June this year, following the slump after the serious earthquake in March 2011.


However, the crude oil demand has declined from a year earlier again since the second week of June.
Current decline is more critical damage than last year. Last year's demand was compared to that in 2010 when economy showed steady recovery, but recent figures are compared to the post-earthquake situation.

Monthly electricity supply by Japanese 10 major utility companies also has shown sluggish. The electricity supply rose from a year ago in five consecutive months after February this year, but the growth rate in May was only 0.2%.


Let's have a quick look at more recent figures.
Electricity supply by Tokyo Electric Power Company fell 2.9% on year in June, according to the data released by the company. The supply in the first week of July sunk further to 8.9% from a year ago.
Other nine major companies' supply in June was likely to decrease as well, due to power saving caused by shuts of nuclear power units.

The below chart shows year-on-year growth of monthly electricity supply by TEPCO. Data until April 2012 were provided by the Agency for Natural Resources and Energy, while May and June numbers are estimated figures calculated by the TEPCO released data.


Nuclear power supply by the Japan's biggest electricity supplier has stopped entirely since April, and the growth of thermal power generation are shrinking throughout May and June.
Liquefied Natural Gas consumption for thermal power generation by TEPCO fell 0.9% on year in May for the first time decline in 15 months. The use of LNG decreased further to 5.7% on year in June.

TEPCO explains that the fewer LNG consumption was caused by maintenance shutdown at thermal power plants prior to the electricity demand period in summer. But the sluggish of regional electricity demand seemed to be an another major factor.

Such slump in electricity supply is match to the sluggish of petroleum demand that was mentioned in the beginning. These tendencies suggest that industrial activities are shrinking in Japan currently.

7.01.2012

Power shortage risk in China to diminish

The typical seasonal problem in China - the shortage of electricity supply during summer has not been so much fear this year.

Since growth of electricity demand has exceeded the increase of electricity generation capacity in China, serious shortage of power supply were frequently seen during the peak demand season in summer and winter over the past several years.

However, very few power supply shortage were reported during the last winter season in early 2012. Then, sufficient electricity supply against expected demand is expected in the coming summer.

Declining coal prices in China seems to prove the forecast. About 80% of total electricity output comes from thermal power generation. Bulk of thermal power fuels are coal in the country.

Although coal prices should be steady during the second quarter prior to the strong summer electricity demand, current coal market in China continues declining since late 2011 due to the sluggish demand.

Both electricity supply and crude oil processing in China seem to appear steady growth tendencies for a long term. But recent movement suggests the growth is slowing.


The following chart draws transition of year-on-year growth electricity outputs in China. Before mid-2008, growth of power supply had been at 10-17%. It became to 10-15% in 2011 after the turmoil caused by the Lehman shock. The growth rate, however, dipped to the single digit level this year and keeps decreasing month by month.


It looks like right after the Lehman shock. Situation on growth of electricity demand in China seems like serious recession period. Slowing down of gross domestic product could be a natural consequence.