CHINA will remain the major influencing factor on the global coal industry for some time to come as urbanisation and capitalisation continue in the vast nation, albeit at a slower pace than during the mining boom. Industrialised Japan and South Korea are strong players while emerging economies in India and South East Asia are increasingly important markets for coal.
|Coal still has a considerable role to play in driving growth, particularly in emerging economies.|
The impact of China was very evident in 2016 as the nation cracked down on its coal miners, forcing them to curb pollution and mitigate a glut of supplies. Safety and poor productivity were also issues which led to closure of many inefficient smaller mines and consolidation of the industry. Another contributor was the banning of North Korean imports.
Steel output in China has generally slowed but urbanisation and industrialisation have some way to go and steel demand is still strong, which means coking coal imports are needed, despite China being a major producer.
Demand for electricity remains strong and there are still millions without it in the world’s most populous country. China is making progress in provision of renewable energy, hydro-electricity and nuclear power but coal-fired power will play a major role for many years.
China’s thermal coal imports in 2017 are expected to increase by about 30 million tonnes over the 2016 figure, according to Noble Group. During the March quarter of 2017 thermal coal imports increased by about 12 million tonnes on the same quarter of 2016. A Noble Group spokesman said that China’s thermal power generation in Q1 2017 increased 7% over Q1 2016, while output of coal increased by only about 4%.
Although established as industrial power houses Japan and South Korea are still major coal importers. Despite also turning more to renewables, both nations know that coal has a role to play in sustaining growth, although both are keen to further develop cleaner coal technologies. Japan is the world’s fifth-largest electricity user and electricity accounts for more than 36% of total energy. This is unlikely to change as the nation is set to build 45 new high efficiency modern coal plants.
Then there are the South East Asian countries, including Indonesia, Vietnam, Myanmar, Thailand and Malaysia, along with India, Pakistan and Bangladesh, which have ambitious growth targets, including provision of electricity. These nations need to rely on the proven efficiency, cost effectiveness and availability of coal to drive this process.
Leading power generator
These factors augur well for coal producing nations such as Australia, Indonesia, Russia and Mongolia. Coal producers that embrace the ‘green revolution’ by developing cleaner coal and additional uses of coal, such as liquefaction, will benefit even more.
Italian coal association Assocarboni states that coal confirmed its leadership in the generation of electricity during 2016, accounting for 40% of global market share. Thermal coal trade decreased slightly from 886 million tonnes to 883 million in 2016. There was a decrease in imports in Europe which was largely balanced by an increase in imports in South East Asian markets. Assocarboni said seaborne coking coal decreased from 249 million tonnes in 2015 to 246 million, primarily due to declining imports across Europe.
The association’s data showed that Australia remained the world’s leading coal exporter with a record of 393.68 million tonnes in 2016, 1% more than 2015. It showed that Indonesia was the leading thermal coal exporter in 2016 with 285.81 million tonnes, a slight decrease on 2015, although it has recently been overtaken by Australia.
Russian coal exports increased 11% from 2015 reaching 131 million tonnes while Colombia’s thermal coal exports registered 88.6 million tonnes compared to 80.5 million in 2015.
China’s 2016 imported 255 million tonnes, a 25% increase on the 2015 data while India imported 203 million tonnes, a 6% reduction on 2015. Imports in Vietnam grew from 7.08 million tonnes to 13.57 million in 2016, Turkey grew from 27.78 million tonnes to 30.3 million and Chile from 10.2 million to 11.6 million tonnes. Thermal coal imports to South Korea increased 1% to 93.7 million tonnes while Japan’s imports of 189.7 million tonnes were almost identical to 2015.
Improved market conditions have seen more investment into the sector, primarily from existing coal companies seeking to expand existing operations, restart mothballed projects or start new mines.
In Indonesia six listed coal sector companies intend to boost capital expenditure in 2017 by at least US$1.3 billion, which is 113.8% higher than in 2016. The companies are PT Tambang Batubara Bukit Asam, PT Adaro Energy, PT Indo Tambangraya Megah, PT United Tractors, PT Delta Dunia Makmur and PT Baramulti Suksessarana. They intend to use the funds to ramp up production and/or develop new projects, including mine acquisitions.
Indonesia’s Ministry of Energy and Mineral Resources has also boosted the country’s coal production in 2017 from 413 million tonnes to 470 million.
Indian government-owned Coal India is looking overseas to grow production. The coal giant has zeroed in on opportunities in South Africa, Indonesia, Australia, Colombia and the US but appears to be keener on Australia and Indonesia owing to the logistical advantages of shipping to India. Neighbouring Pakistan and Bangladesh also require coal to feed economic growth, including in Pakistan’s cement industry, with Indonesia a desired source.
Mongolia is benefiting from the industry’s upturn and during the March quarter the coal trade was valued at $541.3 million, a 446% increase on the same quarter of 2016.