Medium-term Coal Market Report 211 Carlos Fernández Alvarez. Senior Coal Analyst. Gas, Coal and Power Markets Division Madrid, 31 January 212
The context Uncertainties will fundamentally shape the medium-term outlook for coal including: Economy activity and demand Chinese growth and trade policies Supply shocks - Australian floods Longer-term structural changes associated with the nature and rate of decarbonisation
Mtoe Coal was king over the last decade Growth in global energy demand, 2-21 1 6 1 4 1 2 Nuclear Renewables 1 8 Oil 6 4 2 Natural gas Source: IEA World Energy Outlook 211 Total non-coal Coal
World coal demand will continue to grow until 216 Mtce 7 6 5 4 3 World China ROW 2 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Coal demand is expected to grow at around 6 tonnes a day to 216
Power dominates coal use, especially in OECD PEOPLE'S REPUBLIC OF CHINA UNITED STATES 7.3 18.1 11.4 26.9 1.2 356.9 1166 Electricity and heat gen. Industry(Iron and steel) Industry(Others) Residential Others Electricity and heat gen. Industry(Iron and steel) Industry(Others) Residential Others 368.9 628.1 INDIA OECD EUROPE 46.7 4.1 32.8 Electricity and heat gen. 23.6 21.8 15.1 Electricity and heat gen. 36.9 Industry(Iron and steel) Industry(Others) Residential 41.3 Industry(Iron and steel) Industry(Others) Residential Others Others 283.3 31.6 Data from 29. Source: IEA Database Industry is the second largest use, with steel as the main consumer.
Increase in coal supply concentrates in China Note that the graph only refers to the high Chinese production (HPS) scenario.
Mining costs increasing moderately USD /t 9 6 3 27 29 27 29 27 29 27 29 27 29 27 29 Indonesia South Africa OC South Africa UG Colombia NSW OC NSW UG Mining Taxes & Royalties Port & Loading Coal Processing Inland Transport shipping to North - Western European ports Source: IEA Clean Coal Centre analysis based on data from Marston Associates, McCloskey, IEA Analysis.
Costs at destination declined due to lower freights USD /t 9 6 3 27 29 27 29 27 29 27 29 27 29 27 29 Indonesia South Africa OC South Africa UG Colombia NSW OC NSW UG Mining Taxes & Royalties Port & Loading Coal Processing Inland Transport shipping to North-Western European ports Source: IEA Clean Coal Centre analysis based on data from Marston Associates, McCloskey, IEA Analysis.
Jan/9 Feb/9 Mar/9 Apr/9 May/9 Jun/9 Jul/9 Aug/9 Sep/9 Oct/9 Nov/9 Dec/9 Jan/1 Feb/1 Mar/1 Apr/1 May/1 Jun/1 Jul/1 Aug/1 Sep/1 Oct/1 Nov/1 Dec/1 Jan/11 Feb/11 Mar/11 Apr/11 May/11 Jun/11 Jul/11 Aug/11 Sep/11 Oct/11 Nov/11 Prices on the rise since 29 USD/t (6kcal/kg) 18 16 14 12 1 8 6 4 2 Richards Bay (FOB) MCIS NWE steam coal marker (CIF) Quinhuangdao (FOB) Source: McCloskey.
1Q198 1Q1982 1Q1984 1Q1986 1Q1988 1Q199 1Q1992 1Q1994 1Q1996 1Q1998 1Q2 1Q22 1Q24 1Q26 1Q28 1Q21 Are steam and coking coal prices decoupling? 25 USD/t 2 15 1 5 Steam coal price index Coking coal price index Differential Note: Index derived from imported prices in OECD countries (in nominal USD).
Coal trade increases, but most production remains to be consumed locally Mt 14 Seaborne hard coal trade 12 1 8 6 4 2 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Hard coal Hard coal HPS Coking Coking LPS Coking HPS Thermal Thermal LPS Thermal HPS Hard coal LPS
Importers continue to rely on existing major exporters High Production Scenario. Steam coal exports outlook Low Production Scenario Mtce 8 Mtce 7 7 6 6 5 5 4 4 3 3 2 2 1 1 29h 21h 212 214 216 Australia Indonesia Russia China Other South Africa Colombia USA 29h 21h 212 214 216 Australia Indonesia Russia Other China South Africa Colombia USA Indonesia and Australia will continue to be the main suppliers of steam coal US, as high cost supplier and swing exporter, is most affected by Chinese imports
Global coal trade impacted by China production assumptions Mtce 1 5-5 -1 212 214 216 higher in "low Chinese production scenario" lower in "low Chinese production scenario" -15 USA Australia Indonesia Canada Russia South Africa India Other China
Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Uncertainty of imports from major users drives price volatility and investment risk Mt 8 7 6 5 4 3 2 1 Source: McCloskey. Australia Vietnam Mongolia Indonesia other Monthly imports to China from different origins show the high volatility of Chinese purchases
As can very high utilization of export infrastructure Mt Mtpa 4 35 3 25 2 15 1 5 Australia Indonesia South Africa Colombia United States Russia West Russia East Canada Venezuela Port capacity Mining capacity Exports Among the big exporters, only US and Australia provides market with significant spare capacity
Plentyful bulk freight capacity continues Mdwt 5 25-25 -5 211 212 213 214 215 new tonnage required Cumulated excess bulk capacity Orderbook Source: Barry Rogliano Salles, DnB NOR; IEA analysis
Outlook for global export capacity utilisation for seaborne hard coal trade until 216 Mtpa 18 16 14 12 1 8 6 4 2 29 21 212 214 216 installed mine capacity probable mine expansions potential mine expansions Port handling capacity exports - historic exports - China low production exports - China high production
KEY MESSAGES Coal demand will make a substantial contribution to the global energy mix to 216 Key economic uncertainties will largely shape global coal supply, demand, investment and trade over the period Coal demand and trade is projected to grow over the next 5 years, although more slowly than in the last decade China will continue to dominate global coal consumption and trade outcomes, with Indian influence growing Investments in supply capacity and handling infrastructure should be sufficient to meet incremental demand growth over the outlook period However, delays and cancelation of projects as well as weatherrelated events may tighten the market occasionally
Thanks for your attention