A recent special report on coal demand, by the Economist Intelligence Unit, provided a clear overview on a country-by-country basis of the global prospects and challenges facing the coal industry.
While the report notes that there will undoubtedly be regions where coal demand and supply is expected to either slow, flat-line or, in some cases, fall; there are also positive developments taking place in countries such as South Korea and Turkey.
Any global trends witnessed in the coal industry will undoubtedly be influenced by China. Not only is China the second largest global economy, the country also accounts for 45% of global coal consumption and production.
As the country’s economy matures, there will be a more modest demand for energy. Therefore meaning coal demand is reduced. Coal consumption will also be reduced by efficiency gains and attempts to substitute coal with cleaner alternatives.
The EIU report states that “the recent endorsement by the Chinese state council of a plan to cap coal use at 4 billion tpy by 2015 is just one of many signs of Beijing’s determination to shrink coal’s share of the energy mix.”
Overall, the EIU expects China’s consumption of coal to grow by 18% during 2011 – 15, down from 46% in 2006 – 10. Just as the rapid expansion of coal demand and supply experienced over the last decade was driven by the rise in Chinese and other Asian economies, so too will any downward trends.
Looking across from China to the US, utilities in the country are set to overlook coal in favour of cheaper gas-fired plants, as companies look to exploit the potential seen in shale gas.
Carbon emission targets, set down by policymakers in Washington, also restrict coal use in the US.
An upshot of the challenges facing the domestic coal industry in the US is a trend toward exportation. Shipments reached 114 million t in 2012, double the amount seen in 2009. Much of the coal was delivered to a destination some may find surprising: Europe.
Although many thought that the EU’s campaign against climate change might affect Europe’s use of coal. This has not been the case. The EU has failed to set a steep enough price on carbon-emission credits to dissuade utilities from burning coal. Rather than hinder coal’s progress, European coal use grew in both 2011 and 2012.
Russian aspirations and realities
Despite the EU and many other global economies, such as India, using political pressure in attempting to curtail the use of coal, Russia, on the other hand seems set on using more of it.
Russia sits on the world’s second largest reserves of coal. Therefore, governmental policy is geared toward boosting coal-fired power generation. It is thought that by doing so, the country can begin to export its more lucrative gas resources.
However, the realities of transportation costs from Siberia to the western industrialised areas hinder these hopes. Russian coal exports have increased sevenfold since 2000. The EIU report suggests this indicates “China, not western Russia, [will be] the most likely destination for any new coal production in Siberia.”
Decline witnessed, but also new growth
Coal-rich countries, such as Australia and South Africa look set to see their respective coal industries suffer. Both countries face regulatory impasses, while the EIU report also notes South Africa must overcome other obstacles, such as labour strife.
While Australian coal consumption is expected to remain flat for the short term, followed by an eventual decline, South Africa benefits from the fact that the country’s coal reserves will fuel domestic electricity production for decades to come.
There is good news for the global coal industry to be found in emerging countries such as South Korea and Turkey.
In Turkey, coal has enjoyed a renaissance after previous long-term decline. In 2011, coal consumption was more than 20% higher than 2006. Companies such as Taqa of the UAE and GDF Suez of France, both plan to build new coal-fired plants in Turkey.
In South Korea there is further good news. Coal consumption grew by more than 40% in the five years to 2011. This has in turn sparked the construction of new power plants.
Japan has also seen a rise in coal imports, though much like the country’s economy, the growth here is sluggishly moderate.
Coal’s future prospects
Martin Adams, Energy Editor for the EIU concludes, “Coal’s prospects will be determined largely by Asia, particularly China and India. Although these countries are settling into a slower growth trajectory than before […] they will remain the main market for coal supplies.”
Edited from various sources by Samuel Dodson
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