China to lead coal consumption over next five years

15 January 2015

Global demand for coal is expected to surpass nine billion tonnes by 2019, with China accounting for three-fifths of demand during the next five years, according to the International Energy Agency.

While coal consumption declines in Europe and the US, consumption is also expected to grow across Asia, particularly in India and the ASEAN (Association of South East Asian Nations) countries, the annual Medium-Term Coal Market report predicted.

Coal use in OECD member countries is expected to decline in the five years to 2019, and will not be offset by growth in Turkey, Korea and Japan. In the US, retirement of coal capacity and competition from shale gas will lead to an average decline of 1.7 per cent per year during the forecast period. Australia is set to account for the largest growth in exports as Indonesia, driven by higher domestic demand and government policies, slows shipments abroad.

Global coal demand growth has been slowing generally, with the annual rate of increase in the years to 2019 expected to average 2.1 per cent. This compares with a 2.3 per cent rate predicted in 2013 for the five years to 2018 and the actual annual growth rate of 3.3 per cent between 2010 and 2013.

The report stated the global coal market will be determined by the use, production and importing of coal into China, which has recently attempted to diversify its energy supply and reduce its energy intensity, by increasing use of gas, nuclear and renewable energies.

Many coal producers are running at a loss, due to financial liabilities or take-or-pay infrastructure contracts in which buyers may pay a lower penalty price for not purchasing the coal, rather than paying a fixed price. These factors are driving costs down generally.

“Our analysis shows that the price floor provided by production costs has decreased significantly, not only because producers reduced costs by gaining economies of scale, better management and budget discipline, but also due to external factors,” said Keisuke Sadamori, director for energy markets and security.

“Depreciation of local currencies in the main exporting countries has been significant and low oil prices also help, as oil represents a significant share of coal costs, especially in open-pit operations.”

“We have heard many pledges and policies aimed at mitigating climate change, but over the next five years they will mostly fail to arrest the growth in coal demand,” she added. “Although the contribution that coal makes to energy security and access to energy is undeniable, I must emphasise once again that coal use in its current form is simply unsustainable. For this to change, we need to radically accelerate deployment of carbon capture and sequestration.”

She called for more investment in high-efficiency coal-fired power plants, especially in emerging economies.

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