"It is not news that the centre of gravity of the planet is shifting to Asia. This is true when talking of the economy in general, and particularly true of energy. But this tendency is most obvious for coal, Asia represents almost three-quarters of coal consumption and virtually all of the growth during the outlook period to 2019," IEA Executive Director Maria van der Hoeven said.
|Incremental coal demand during the outlook period - IEA|
The Executive Director also called for more investment in high-efficiency coal-fired power plants, especially in emerging economies. "New plants are being built, in an arc running from South Africa to South East Asia, but too many of these are based on decades-old technology," she said. "Regrettably, they will be burning coal inefficiently for many years to come."
Global coal demand growth has been slowing in recent years, and the report sees that trend continuing. Coal demand will grow at an average rate of 2.1% per year through 2019, the report said. This compares to the 2013 report's forecast of 2.3% for the five years through 2018 and the actual growth rate of 3.3% per year between 2010 and 2013.
|Electricity generation growth in China by fuel - IEA|
The report's forecasts come with considerable uncertainties, especially regarding the prospect of new policies affecting coal. Authorities in China as well as in key markets like Indonesia, Korea, Germany and India, have announced policy changes that could sharply affect coal market fundamentals. The possibility of these policy changes becoming reality is compounding uncertainty resulting from the current economic climate.
The issue of low prices remains a hot topic among coal market participants. Last year's report emphasised that many coal producers were running at losses, largely driven by take-or-pay infrastructure contracts or financial liabilities. Coal prices have declined even more since last year, but several factors have helped producers withstand further economic pain.
|Indexed coal price markers in local currency - IEA|
Coal use in OECD member countries is projected to decline in the outlook period, as growth in Turkey, Korea and Japan fails to offset declines in Europe and America. In the United States, retirement of coal capacity and competition from shale gas will lead to a 1.7% decline per year on average during the forecast period. Australia is set to account for the largest growth in exports as Indonesia, driven by higher domestic demand and government policies, slows shipments abroad.
Medium-Term Coal Market Report 2014 highlights:
- In 2013, coal demand continued to grow and was once again the fastest-growing fossil fuel. But though demand growth in 2013 (+2.4% or +188 Mt) was slightly higher than in 2012, it was still substantially lower than the average over the last ten years (+4.6%).
- China remains the centre of the coal world. In energy units, China consumed more than 50% of global coal demand in 2013. Moreover, China is by far the largest producer and importer of coal. China imported 341 Mt of coal in 2013, the largest amount of coal ever imported in a single year.
- Asian countries, in particular China, remain the driving force of coal demand growth. Incremental demand in China (+196 Mt) alone exceeded all global growth in 2013. That is because coal demand in non-Asian countries decreased, though developments varied significantly from country to country. Higher natural gas prices in the US, for instance, helped coal demand recover part of its 2012 decrease
- Thermal and met coal prices continued to decline in 2014. International coal prices have been under pressure from oversupply as well as price cuts by Chinese domestic producers who were seeking to secure market share. Imported European steam coal prices went down to $70-80/tonne in 2014 and Australian met coal has been between $112/tonne and $116/tonne since April. In this low price market environment, coal producers continued their efforts to reduce supply costs; however, many are still operating at a loss.
- Global coal demand is forecast to grow over the outlook period. Coal consumption worldwide is forecast to increase by 2.1% per year until 2019 (+772 Mtce). Most of the incremental growth comes from China (+471 Mtce) even though the country is expected to take strong action to diversify primary energy sources and increase energy efficiency. India (+177 Mtce) and ASEAN countries (+79 Mtce) also play important roles in strengthening Asia’s status as the coal continent.
- The shift in international seaborne coal trade to the Pacific Basin will continue. India is the growth engine, with coal imports projected to grow by 9.7% per year – equivalent to a total increase of 103 Mtce. India thereby accounts for almost half of the growth in international seaborne trade. Chinese imports are projected to peak in 2017. Incremental seaborne exports predominantly come from Australia (+76 Mtce) and Indonesia (+42 Mtce).
- Significant export capacity additions are in the pipeline. Between roughly 100 Mtpa (probable) and 400 Mtpa (potential) of export mine expansion capacity will serve growing coal demand. Nonetheless, low coal prices and the current perception of an oversupplied market make investors more cautious than in the past, with projects worldwide being delayed, postponed or cancelled
Download more resources:
Launch speech by IEA Executive Director
Launch presentation by Director of Energy Markets and Security
The Medium-Term Coal Market Report 2014 (Market Analysis and Forecasts to 2019, 132 pages, ISBN 978-92-64-22188-8, paper €100, PDF €80) can be purchased at the IEA online bookshop.
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