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Coal 2018 Analysis and Forecasts to 2023

Keisuke Sadamori – Director, Energy Markets and Security, IEA
IEEJ, Tokyo, 26th December 2018

IEA
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Coal market update

• After two years of decline, global coal demand grew in 2017 and is estimated to
increase further again in 2018

• Coal demand grew strongly in India, Southeast Asian countries and Korea in
2017, while decline continued in Europe and North America

• With seaborne thermal coal trade growing and no large new mining capacity,
prices remain high

• High prices pushed up coal production in price sensitive exporters, particularly

the US (up 6.3%) and Indonesia (up 5.2%)

• Climate and air quality regulations, divestment campaigns, phase out policies,
declining costs of renewables and more abundant gas are all putting additional
pressure on coal

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2017, when growths were bigger than declines again

2017-2016 difference in coal consumption (left) and production (right)

60 120
Mt

Mt
50 100

40 80

30 60

20 40

10 20

0 0

‐10 ‐20

‐20 ‐40

Whereas growth is mostly in Asia and decline in Europe, United States is in a very particular position

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Prices remain high

Thermal and coking coal price indices, 2015-18

USD/t
350
300
250
200
150
100
50
0

Newcastle (6000 kcal) Australian LV PCI Australian prime hard coking

Sustained demand, Chinese supply side reforms and lack of investment in coal mining underpinned
high prices
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China is still the price setter in international markets

Coal prices (6000 kcal/kg) in China

RMB/t
800

700

600

500

400

300

Qinhuangdao FOB price Bohai-Rim steam-coal price index

The comfort zone for the Chinese producers and consumers is the global reference for international
coal prices
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Much talk but not much change

Comparison between Coal 2017 and Coal 2018 global coal demand forecasts
6000

5500

5000
Mtce

4500

4000

3500

3000

Coal 2017 report Coal 2018 report

IEA statistics (continuous line) and IEA forecast (dotted line)

Despite numerous policy changes and announcements,

the forecast of coal demand is almost unchanged compared with last year’s forecast
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One planet, two coal worlds

Coal demand in select countries/regions in 2000, 2017 and 2023 (forecast)

3000

2500

2000
Mtce

1500

1000

500

0
US EU‐28 Japan Korea China India Southeast Asia

2000 2017 2023

India and southeast Asia will lead coal demand growth while it will continue to decline in
Europe and United States
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Understanding China to understand coal

Power Heavy industry

Small industrial and residential Coal conversion

Four largest coal consuming sectors in China follow different trends

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Fight for blue skies

Coal (Mt) saved in industrial boilers, 2017-22

LNG spot prices

23
14.0

12.0

10.0
43
8.0
Beijing-Tianjin-Hebei
6.0

4.0 37

2.0

0.0
Nov‐17

Nov‐18
Jul‐17
Aug‐17
Sep‐17
Oct‐17

Dec‐17
Jan‐18
Feb‐18
Mar‐18
Apr‐18
May‐18
Jun‐18
Jul‐18
Aug‐18
Sep‐18
Oct‐18
Other regions 7

China UK France Spain TTF

Pearl river delta Yangtze river delta and
(Guangdong) other Eastern China

Source: IEA Coal 2017

Phase out of coal boilers and stoves in China pushed up LNG prices all over the world.
In an interconnected world, Chinese coal is at the centre of the energy stage.
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China’s path to a less energy intensive economy

GDP, power demand and coal generation growth in China

16.0%
20.0%

14.0%
15.0%
12.0%

10.0%
10.0%
8.0%

5.0%
6.0%

4.0%
0.0%
2.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0.0%
‐5.0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP growth Total generation growth Coal generation growth
GDP growth (6 year average) Power growth (6 years average) Coal generation growth (6 years average)

Whereas the structural transformation of the Chinese economy is unequivocal, and “blue skies” remains the
policy priority, electricity demand is boosted by air quality policies, growing middle class and other factors
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Dominance of Chinese power sector in global coal market

Relationship between global coal demand and hydro generation/power demand in China

4.0%
Global coal demand increase

3.0%

2.0% China hydro

output growth
1.0%

0.0%
China power
-1.0% demand growth

-2.0%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Hydro output or power demand growth

Changes in Chinese power demand and hydro output have a significant impact on global coal demand.

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Coal power generation in India is set to continue to grow

TWh Forecast
1800 90%
1600 80%
1400 70%
1200 60%
1000 50%
800 40%
600 30%
400 20%
200 10%
0 0%
1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023

Coal-fired generation (TWh) Share coal (%) Share renewables (%)

Coal has been a cornerstone of India’s power system.

Renewables and more efficient coal plants reduce the forecast rate of growth.
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Coal for power will be the driver of demand growth in southeast Asia

Electricity generation by source in southeast Asia

600
TWh
Forecast
500

400

300

200

100

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Renewables Coal Others

Increasing use of coal for electricity will push up consumption in some of the countries in southeast Asia
(Indonesia, Vietnam, Philippines and Malaysia)
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(Western) EU on its way out of coal

Coal phase out in EU-28 Coal’s share in Power Generation

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

No coal power Phase out announced

Cyprus, Belgium, Estonia, Latvia, Lithuania, Luxembourg and Malta do not have coal power plants in operation
Phase out under
No phase out
discussion

Phase-out policies are broadly announced and implemented in EU countries.

The challenge imposed by the end of coal-based electricity is country-specific
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Low investment due to uncertain demand

The evolution of exports from six major thermal coal exporters between 2011 and 2023

Mt Forecast
450
400
350
Indonesia
300
250 Australia
200 Russia
150
Colombia
100 South Africa
50 United States
0
2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022* 2023*
*Forecast

Russia’s infrastructure expansion will support export growth.

United States and Indonesia will continue to be the most price sensitive exporters
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International CCUS Summit, Edinburgh

UK and IEA hosted 50 senior delegates from across government, industry and the finance sector to
support new momentum for CCUS
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Key messages

• Global coal demand through 2023 set to be stable, as growth in India and
other Asian countries will offset decline in Europe and US

• China remains the key player in coal market. The rise of power demand in
China, the main driver of a recent global coal rebound, will likely slow down in the
coming years; but uncertainties remain

• Despite high prices, investment in new mines remains low. Uncertain demand
for imported coal, risks associated with climate policy and local opposition have
cooled investors’ appetites

• One planet, two coal worlds. In one world, closing coal power plants is a key
climate policy. In the other, coal will play a continuing role thanks to its
affordability and local availability. Carbon capture, utilization and storage is the
bridge between the two worlds

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