TABLE OF CONTENTS Foreword... 3 Acknowledgements... 4 Executive Summary... 13 Coal s decade of stagnation... 13 While some demand centres are in decline, others are taking off... 13 High prices endure, along with volatility... 14 Uncertainty is the main certainty for coal trade... 14 Understanding priorities in China... 14 Coal still advances in India... 15 Better times for US coal?... 15 New boost in CCUS is pivotal... 16 1. Recent trends in demand and supply... 17 Highlights... 17 Demand... 18 OECD demand trends... 19 OECD non-member demand trends... 24 Supply... 29 OECD supply trends... 30 OECD non-member supply trends... 32 References... 36 2. Recent trends in international coal trading... 37 Highlights... 37 The international coal market... 37 International thermal coal trade... 38 International met coal trade... 40 Regional analysis... 40 Exporters... 40 Importers... 46 Prices... 50 Seaborne thermal coal prices and regional arbitrage... 52 Seaborne met coal prices... 55 Coal forward prices... 55 6 COAL 2017
Coal derivatives... 56 Coal supply costs... 57 Development of input factor prices... 57 Currency exchange rates... 59 Dry bulk shipping market... 61 Development of coal supply costs... 63 References... 65 3. Medium-term forecast of demand and supply... 67 Highlights... 67 Methodology... 68 Assumptions... 68 Global coal demand forecast... 70 OECD coal demand forecast, 2017-22... 71 OECD non-member coal demand forecast, 2017-22... 80 Global coal supply forecast... 90 References... 97 4. Medium-term forecast of seaborne coal trade... 99 Highlights... 99 Methodology and assumptions... 100 Seaborne coal trade forecast... 100 Seaborne thermal coal trade forecast, 2017-22... 101 Seaborne met coal trade forecast, 2017-22... 113 References... 117 5. Capacity investment outlook... 119 Highlights... 119 Are coal prices high enough to trigger investment?... 119 Investment in export mining capacity... 122 Regional analysis... 123 Australia... 123 Colombia... 124 South Africa... 125 Mozambique... 126 Russia... 126 Indonesia... 127 COAL 2017 7
Canada... 128 United States... 128 Mongolia... 129 References... 130 Annex 1... 131 Annex 2... 135 Glossary... 140 LIST OF FIGURES Figure 1.1 Figure 1.2 Figure 1.3 Figure 1.4 Figure 1.5 Figure 1.6 Figure 1.7 Figure 1.8 Figure 1.9 Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Figure 2.6 Figure 2.7 Figure 2.8 Figure 2.9 Figure 2.10 Figure 2.11 Figure 2.12 Figure 2.13 Figure 2.14 Replacement of coal-fired generation in the United Kingdom, 2012-16... 21 Coal-based electricity generation in selected OECD countries: Absolute changes, 2015-16... 22 Monthly year-on-year differences in crude steel production in OECD member countries, 2014-17... 23 Coal-based electricity generation in selected OECD non-member economies... 26 Capability of current flue gas treatment systems... 27 Monthly year-on-year differences in crude steel production in OECD non-member economies, 2014-17... 28 CCP production and consumption in the Unites States, 1972-15... 32 Monthly year-on-year differences in coal mining in Inner Mongolia, Shanxi and Shaanxi, 2016 compared with 2015... 33 Calorific value of Indonesian coal exports in 2016... 34 Market development of seaborne thermal (left) and met coal (right), 2011-16... 38 Australian exports of thermal coal (left) and met coal (right), 2002-16... 41 Monthly y-o-y differences in Indonesian exports to China (2016 in comparison with 2015)... 42 Indonesian export destinations, 2002-16... 42 Colombian export destinations, 2002-16... 43 South African export destinations, 2002-16... 44 US exports of thermal coal (left) and met coal (right), 2002-16... 45 Chinese coal imports, 2003-16... 46 Monthly year-on-year differences in Chinese imports, 2015-17... 47 Indian coal imports by country, 2002-16... 48 Marker prices for different types of coal, 2015-17... 50 Weekly Qinhuangdao price evolution, 2015-17... 51 Thermal coal price markers in Europe, China and Colombia, 2016-17... 52 Colombian exports to Asia... 53 8 COAL 2017
Figure 2.15 Price markers for different thermal coal qualities in South Africa and Australia, standardised to an energy content of 6 000 kcal/kg, 2015-17... 53 Figure 2.16 Hard coking coal prices and developments affecting supply... 54 Figure 2.17 Coking coal price and monthly year-on-year BFI production growth, 2014-17... 55 Figure 2.18 Forward curves of API 2 (left) and API 4 (right), 2016-17... 56 Figure 2.19 Trade volumes for coal derivatives, 2000-16... 56 Figure 2.20 Indexed nominal prices of selected commodities used in coal mining... 57 Figure 2.21 Average coal-mining fuel costs (left axis) and their share in total mining costs (right axis), 2014-16... 58 Figure 2.22 Average coal-mining labour costs (left axis) and their share in total mining costs (right axis), 2014-16... 59 Figure 2.23 Mining cash-cost components, averages and value ranges, 2016... 59 Figure 2.24 Indexed development of the USD against selected currencies... 60 Figure 2.25 FOB steam coal prices in USD and local currency, 2014-17... 61 Figure 2.26 Bulk carrier fleet, 2010-17... 62 Figure 2.27 Selected freight rates, 2006-17... 62 Figure 2.28 Indicative steam coal supply costs to north-western Europe, 2014-16... 63 Figure 2.29 Indonesian steam coal supply cost curves, 2014-16... 63 Figure 2.30 Indicative coking coal FOB cost curves and FOB prices, 2014-16... 64 Figure 3.1 Implied marginal costs of coal- and gas-fired electricity generation, 2016-22... 69 Figure 3.2 Projected thermal coal and lignite demand for OECD member countries... 72 Figure 3.3 Indicative merit order for the German electricity market... 74 Figure 3.4 Coal-to-gas competition in the German electricity market, historically (left) and in the future (right)... 75 Figure 3.5 Thermal coal and lignite demand shares, Poland and Germany... 76 Figure 3.6 Share of coal in EU countries power generation (2016), capacity and BREF votes... 78 Figure 3.7 Projected met coal demand for OECD member countries... 79 Figure 3.8 Projected thermal coal and lignite demand for OECD non-member economies... 79 Figure 3.9 Per capita electricity consumption of selected countries, 2016... 85 Figure 3.10 Projected met coal demand for OECD non-member economies... 87 Figure 3.11 Projected thermal coal and lignite supply... 91 Figure 3.12 Projected met coal supply... 95 Figure 4.1 Projected total export volumes in international steam (left) and met coal (right)... 101 Figure 4.2 Projected seaborne thermal coal imports... 101 Figure 4.3 Southern Chinese seaborne domestic and import supply cost curve (FOB) in 2016 (left) and 2022 (right)... 103 Figure 4.4 Korean coal import tax scheme... 107 Figure 4.5 Korea s coal and gas generation capacity and load factor, 2011-15... 109 Figure 4.6 Variable costs by case... 110 Figure 4.7 Thermal efficiency of coal-fired power plants and gas-fired CCGTs... 110 COAL 2017 9
Figure 4.8 Figure 4.9 Figure 4.10 Projected seaborne thermal coal exports... 111 Projected seaborne met coal imports... 113 Projected seaborne met coal exports... 115 LIST OF MAPS Map 2.1 Main trade flows in the seaborne thermal coal market, 2016 (Mt)... 39 Map 2.2 Main trade flows in the seaborne met coal market, 2016 (Mt)... 40 Map 3.1 Incremental global coal demand 2016-22 (Mtce)... 70 Map 3.2 Coal-to-gas switch in industrial boilers in China (Mt of coal avoided)... 82 Map 3.3 Coal power plants in Pakistan... 88 Map 4.1 Main Indian plants based on imported coal and ports, 2016... 105 Map 5.1 Cumulative capacity of hard coal export mining projects, 2018-22... 122 LIST OF TABLES Table 1.1 Coal demand overview... 18 Table 1.2 Hard coal and lignite consumption in selected OECD member countries (Mt)... 20 Table 1.3 Korean coal-fired power plants commissioned in 2016... 22 Table 1.4 Hard coal and lignite consumption in selected OECD non-member economies (Mt)... 24 Table 1.5 Coal supply overview... 29 Table 1.6 Hard coal and lignite production in selected OECD member countries (Mt)... 30 Table 1.7 Hard coal and lignite production in selected OECD non-member economies (Mt)... 35 Table 2.1 Thermal coal exports in 2016 (Mt) and net changes from 2015 (colour-coded)... 39 Table 3.1 Remaining nuclear power plants in Germany and latest decommissioning dates... 73 Table 3.2 Japanese coal-fired power plants under construction... 76 Table 3.3 Korean coal-fired power plants older than 30 years... 77 Table 3.4 Korean coal-fired power plants under construction... 77 Table 3.5 Selected large Indonesian coal-fired power plants under construction... 86 Table 4.1 UHV lines commissioned in 2017... 102 Table 4.2 Coal and gas tax scheme... 109 Table A.1 Coal demand, 2015-22, forecast (million tonnes of coal equivalent [Mtce])... 131 Table A.2 Thermal coal and lignite demand, 2015-22, forecast (Mtce)... 131 Table A.3 Metallurgical (met) coal demand, 2015-22, forecast (Mtce)... 132 Table A.4 Coal production, 2015-22, forecast (Mtce)... 132 Table A.5 Thermal coal and lignite production, 2015-22, forecast (Mtce)... 133 Table A.6 Met coal production, 2015-22, forecast (Mtce)... 133 Table A.7 Seaborne steam coal imports, 2015-22, forecast (Mtce)... 134 Table A.8 Seaborne steam coal exports, 2015-22, forecast (Mtce)... 134 10 COAL 2017
Table A.9 Seaborne met coal imports, 2015-22, forecast (Mtce)... 134 Table A.10 Seaborne met coal exports, 2015-22, forecast (Mtce)... 134 Table A.11 Current coal mining projects... 135 LIST OF BOXES Box 1.1 Emissions, concentrations and air quality... 26 Box 1.2 Coal ash, turning a burden into value... 31 Box 2.1 Déjà vu in Queensland... 54 Box 3.1 Fuel switch in Germany: What prices are necessary?... 74 Box 3.2 European Union on its way out of coal... 78 Box 3.3 Pakistan switching on... 88 Box 3.4 Supply-side reforms in China s coal industry... 94 Box 4.1 Reducing coal imports through UHV line construction... 102 Box 4.2 Interpreting Indian acronyms... 106 Box 4.3 Korea s changing energy policy approach... 109 Box 5.1 Success and setbacks for CCS coal-fired power in 2017... 120 COAL 2017 11