Coal news and updates

As Australia mulls the building of its biggest-ever export thermal coal mine, its biggest foreign buyers look set to reduce their consumption, driving down the price of Australian coal, and the profitability of its mines.

 

Japan, South Korea and Taiwan together buy about 30% of the world’s exported thermal coal, including 70% of Australia’s export coal.

 

Australia’s office of the chief economist has projected that market will grow by 8.7% by 2022 – triple the global rate of growth in the sector – but analysis by the pro-renewables Institute for Energy Economics and Financial Analysis (Ieefa) suggests the market will actually contract.

 

The Australian projections assume a growth in the global export coal market of 2.5% by 2022, but Ieefa analyst Tim Buckley says that is overly optimistic, given the world’s two largest buyers are clearly contracting.

 

 

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China, the world’s biggest buyer of foreign coal, is forecast to continue to reduce imports after reaching its peak in 2013. And India aims to virtually cease thermal coal imports.

 

But Buckley says the main problem for Australia’s biggest overseas thermal coal markets is internal moves in Taiwan, South Korea and Japan, which make Australia’s projections, released in March, out of date.

 

In what was described in local press as an “unprecedented move”, the new Korean president elected in May, Moon Jae-in, immediately ordered the temporary closure of eight ageing coal power plants in South Korea for 30 days, and announced 10 plants would be shut down for a third of each year starting from 2018.

 

Moon also reportedly said he would consider suspending the construction of coal power plants that are less than 10% completed.

 

In Japan, decreased electricity consumption and growth in renewable energy was dampening post-Fukushima plans of a boom in coal-generated electricity, Buckely said, with two proposed plants already cancelled in the first three months of 2017. That was likely to be the tip of the iceberg in the next few years, he said.

 

 

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In May, Taiwan updated its eight-year green energy development plan, which forecast a decline of one-third in its reliance on coal.

 

“The combined implications of Japan, South Korea and Taiwan as Australia’s three most import thermal coal export markets is profound,” Buckley said.

 

The result, Buckley said, is likely to be a reduction in demand for Australian coal from those countries of up to 2% each year.

 

“The election of president Moon Jae-in brings major changes to South Korea’s energy sector, and comes at a time when Taiwan’s president Tsai Ing-wen is also pressing for a radical electricity sector transformation. Combined with the growing evidence of a sustained change in Japan’s electricity market, this looks set to have a major impact on the high energy seaborne thermal coal sector,” he said.

“Seaborne thermal coal import demand peaked in 2014 and is facing increasing headwinds. This is a structural decline reflecting the combined pressures of increasing climate policy actions, ever more cost effective renewable energy and growing air pollution concerns.”

 

“Combined with the risk of increased supply from [Adani’s] Carmichael mine, this can only serve to leave the seaborne market oversupplied and the inevitable outcome is lower equilibrium pricing, reduced profit margins and more pressure to cut costs, meaning fewer jobs and royalties,” Buckley said.

 

The news follows the release of industry-funded analysis suggesting the construction of Adani’s huge Carmichael mine – which would be Australia’s biggest-ever coal mine – would drive down the price of export thermal coal, reducing production from elsewhere in Queensland and in New South Wales.

Source: The Gurdian