Coal: World steam coal trade to increase 66% by 2015
Doerell, Peter E
Despite attacks from environmentalists, last year’s forecast “Long-term Prospects Remain Very Good” is unchanged. Coal offers the best guarantee for security of supply and coal has a proven track record for price stability.
According to a recent U.S. Department of Energy (DOE) analysis, the international trade in steam coal will increase by 66% in the period between 1995 and 2015. Volumes will go up from 290.1M st in 1995 to 488.7M st in 2015 – a rise of 192.6M st in this 20-year period. Steam coal will thus account for 72% of the worldwide coal trade in 2015, versus its current 60% share. Total trade volume is expected to remain at around 9% of world coal consumption. It will increase by 38% over the 1995 level of 485M st to 670M st in 2015.
Asia’s steam-coal market will increase more dramatically than any other region, in view of the power demand by Japan, South Korea, and Taiwan. Steam-coal exports to Asia are projected to increase by 200% to 283.8M st/yr in 2015, up from 140.4M st in 1995. These exports will account for 42% of coal traded worldwide. Japan alone will continue to be the largest coal importer in the world at around 25%.
Other steam coal markets will increase as well. The DOE study projects that U.S. steam coal exports to Europe will double, from 23.2M st in 1995 to 46.6M st in 2015. Canada’s steam coal exports to Europe will increase nearly tenfold, from 400K st (1995) to 3.9M st (2015). In addition, South America will also be exporting a greater amount (339%) of steam coal to Europe: from 16.1M st to 54.4M st.
Market Shifts. As indicated in the DOE report, the relative market shares of steam and coking coal suppliers will change during the forecast period. Asia’s coal demand will increase by 59%, and Europe’s by 21% (to 217.8M st in 2015). Germany is projected to account for two-thirds of Europe’s import increase.
Australia will continue to be a major supplier of coal to Asia, supplying almost one half of the region’s total imports in 2015. China and Indonesia combined are estimated to supply 23% in 2015. Thus, a projected 27% of Asia’s imported coal needs will need to be met from outside these three supply sources. South Africa is projected to export about 50.4M st coal to Asia in 2015, which would be a 250% increase over its 1995 level of 21.3M st. U.S. exports to Asia will increase by approximately 20%, and Canada’s exports are projected to increase by about 9%.
Slight Decline in Global Coking Coal Market. Compared with the international steam coal market, the DOE expects the coking trade to remain relatively stable, declining slightly in tonnage. Several factors contribute to this: further increases steel production from electric arc furnaces (which do not use coke), improved blast furnace processes, and greater use of pulverized coal injection (PCI). Slight increases in coking coal imports, however, are expected for South Korea, Taiwan, India, and Brazil. The DOE estimates that the volume of world trade in coking coal will be around 207.3M st in 2015.
EU coal imports could rise to 367M mt in 2020. A study by market-research company DRI/McGraw-Hill predicts a renaissance of European coal consumption. Where 1996 represented the lowest point in consumption to date with 178M mt OE (1 ton oil equivalent = 1.45 mt HCE, hard coal equivalent), Europe will probably return to its 1970 level of consumption, i.e. 257M mt OE, around the year 2015.
Coal imports will grow to meet the expansion in demand. Imports will grow from 87M mt OE in 1996 to 120M mt OE in 1997, 113M mt OE in 1998, 124M mt OE in 1999 and 253M mt OE (367M mt HCE) in 2020. The 1997-1998 period represents the “bottoming out” phase of the decline in coal consumption as the short to medium term outlook in the power generation sector continues to favor gas. However, in the long term, gas prices will catch up improving the competitive position of coal.
According to the DRI study, the situation in Germany will have a considerable effect on developments. Domestic coking coal will be replaced more and more by imported coal, and the power generation sector will play a decisive role with the continuing decline in nuclear power. In 1995 nuclear power still accounted for 28% of total electricity production, hard coal and lignite 58% and natural gas 7%. By 2020, the share for nuclear generation will be at only 13%, while coal will remain at 65% and natural gas will be 16.5%. Overall coal demand in Germany will grow from 52.7M mt OE in 1995 to 100.3M mt OE in 2020, with coal imports moving from 9.6M mt OE in 1995 to 80.8M mt OE in 2020. (If the life of the German nuclear stations is extended beyond our estimate of 40 years, then 11-16M mt OE of coal would be taken off the DRI estimate in 2020. However, even in this case Germany will still represent the largest increase of coal demand between 1996 and 2020, according to the study.)
Price Setting. With regard to price development, DRI predicts a 21 % rise in average import coal prices free ARA ports (Amsterdam, Rotterdam, Antwerp). Both with regard to volume and price, coal exports to Europe will thus form a solid basis for international coal trade in the future.
EU Commission’s View. With regard to the European Community of 15, the EU commission’s revised estimates for 1997 show a more optimistic picture than the earlier forecasts. For hard coal, resources are now expected to reach over 270M mt, some 0.8M mt less than 1996 deliveries. The 1997 figures for Community hard-coal production are also higher than earlier forecasts, at some 123M mt, as a result of higher estimates from Germany.
Hard-coal deliveries for 1997 have also improved on earlier forecasts as a result of increasing economic activity to 262M mt, but this still remains lower than the 1996 figures. Deliveries to coking plants have increased, while power station deliveries have declined although their stocks appear to be increasing.
Forecasts for the coke market have been revised upward for both 1996 and 1997, with deliveries up to 46M mt for 1997. However, the coke market is weak worldwide and the 1997 figures do represent a drop of about 1M mt on 1996 despite a stronger steel market and is due to changes in steel-making technology. Community production in 1997 was higher than previous estimates, at nearly 40M mt, and only marginally less than 1996 production levels.
Lignite production is declining slightly year on year, the chief reduction being in the briquetting market.
The international coal market is facing a period of oversupply and prices are dropping, with the effect that some suppliers are withdrawing from the market while those with high stocks are discounting to give very cheap spot cargoes. The oversupply is likely to spread to the coking market in the next year. Much of this surplus is the result of reduced activity in the Asian and Far Eastern markets, but this is likely to be reversed with the next year or so as new coal-fired power stations come on stream.
WEC warns against euphoria with regard to natural gas and renewable energies. At a time when certain politicians and media are advocating abandonment of fossil energies in the interests of “climate protection,” the president of the German national committee of the World Energy Council (WEC), Dr. Gerhard Ott, has warned of euphoria with regard to some energy forms. In the 1950s and ’60s there was a similar euphoria for nuclear energy, and now it is natural gas’ turn. And some people only dream of renewable energies. Especially in the case of the latter Ott considers expectations to be too high. He believes that only 5-7% of global energy requirements can be met by wind power, photo-voltaic (solar energy), and the other renewable energy sources in the foreseeable future. Currently these account for 2%.
Ott also remarked that we should rely entirely on natural gas just as little. This also applies against the background of the security of supply. Particularly in the case of oil and gas supply, the whole world is dependent on two regions. According to calculations by the WEC, economically recoverable reserves of crude oil amount to about 138B mt and those of natural gas about 118B mt, of which 65% of oil deposits and 32% of natural gas deposits are located in the Middle East. Together with the deposits in the CIS countries, about 71% of global crude oil and natural gas reserves are located in politically unstable regions.
Kyoto Outcome. Since 1992 coal has been the main target of pressure groups who claim that COZ emissions will cause a global “climate disaster.” A drastic reduction of fossil fuel use is demanded. Despite that all their arguments have been refuted by reputable scientists, the anti-fossil-fuel advocates were hoping that the Kyoto “summit” would bring binding commitments of drastic CO^sub 2^ cuts. In reality, the final “protocol” of the conference showed clearly that no nation is willing to ruin its economy by imposing a high CO^sub 2^ tax on itself. The meager compromises will have to be approved by the national parliaments, and the U.S. Senate has already declared its unequivocal “no.” Without the leading player on the world scene, the United States, even the most ardent governments would not dare to go it alone. The battle is not over yet, but the biggest threat to coal’s future is crumbling.
Dr. Peter E. Doerell, E&MJ Coal News Editor
Copyright Intertec Publishing Mar 1998
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