The Asia Pacific region will continue to be the sole source of market impetus for the coal industry during the remainder of 2011 and throughout 2012, with China, and to a lesser extent India, driving demand and Australia, Indonesia, and to a lesser, but increasing, extent Mongolia, the supply side. South Africa will also play a major role in satisfying Asian demand.
In a coal industry report, Barclays says the Asia Pacific impetus will be enhanced by US demand muted by low gas prices and European Union demand kept in check by expansion in renewable generation and poor macroeconomic prospects. While China will remain the prime factor on the demand side of the equation, Barclays says 2012 will possibly herald the beginning of a period which sees its import demand start to fall. The issue is not really a lack of incremental demand as the robust build out of coal-fired generation continues apace with another 300GW scheduled to be commissioned between 2011 and 2015 – adding around 570 million tonnes of demand by 2015.
Barclays expects China to slowdown in 2012 by 7% to 91 million tonnes even after falling by more than 10% in 2011. It says this projection hides a number of key developments. Chinese demand should grow strongly between 2011 and 2015 as a draft report of the 12th five-year plan published in June indicates that total installed generation capacity could reach 1340-1500GW by 2015, up from 962GW in 2010. Of this, almost 300GW of new additions of coal-fired plants are planned in the next five years, slightly higher than the 280GW installed from 2005-10.
According to the 12th five-year plan, China is also expected to produce 3.8 billion tonnes of coal by 2015, with output being some 550 million tonnes higher than the 2010 level. In 2010, total production was 890 million tonnes higher than 2005. Xinjiang province is the key development area in the next 10 years for China’s coal industry as its resources amount to roughly 40% of the national total. Construction of a new rail link between Xinjiang to the inland provinces, which will be completed in 2013, should help improve transport significantly and allow the regional output of coal to rise to 500 million tonnes in 2015 and 1 billion in 2020 (26% of total output), according to the regional government.
Consolidation of the coal mining industry will continue in major producing provinces, including Inner Mongolia, Henan and Shaanxi. China is due to finish the consolidation process well before 2015 after which there will be 10 companies that have the capacity of 1 billion tonnes each and 10 companies that have the capacity of 500 million tonnes each, summing up to 60% of total national production.
Overall, while demand is likely to be greater than supply in 2012, Barclays does not expect Chinese coal imports to exceed this year’s levels and would also expect a declining trend in overall net imports from here on. The key uncertainty lies in the exact timing of the potentially large levels of production, especially from the Xinjiang region, coming online, together with the completion of the infrastructure projects that would facilitate the transportation of that coal.
Although Indonesia’s government plans to ban the export of low-grade coal of lower than 5100 kcal/kg from 2014 and demand at a local level is increasing, the island nation will still play the major role in Asian coal export supply as production increases and new mines are opened up. It is the world’s largest thermal coal exporter. The 2011 BP Statistical Review of World Energy indicates that Indonesia’s coal production grew by 19.4% in 2010 to 305.879 million tonnes from 256.181 million tonnes in 2009, the fastest growth in the world.
Indonesia’s market share to global coal production was 5% with the biggest market share of global production being China which accounted 48.3% and USA 14.8%. The BP’s statistics said that China produced 1.8 billion tonnes of coal in 2010 and USA 552.2 million tonnes. New Zealand had the second fastest growth of coal production - 16.8% to 3.3 million tonnes. North American coal production in 2010 grew 2.3% to 591.6 million tonnes, while South and Central America grew 2.6%, Europe and Eurasia 2.1%, Africa 1.3%, Asia Pacific 8.4%, and total world growth was 6.3%.
BP said Chinese consumption grew by 10.1%. China last year consumed 48.2% of the world’s coal and accounted for nearly two-thirds of global consumption growth. India consumption grew 10.8% to 277.6 million tonnes oil equivalent. Meanwhile, Indonesia and Japan consumption also grew 13.7% to 39.4 million tonnes and 123.7 million tonnes.
On the domestic front, Indonesia’s coal miners are expected to supply 82 million tonnes for local demand during 2012, up from 78.97 million tonnes this year. The Ministry of Energy and Mineral Resources says production in 2012 is estimated to increase 23% to 332 million tonnes with about 75.91% for export and the remainder for local needs.