China's coal use falling faster than expected

As the use of cleaner-burning fuels and slowing economic growth drags thermal utilisation rates to a potential record low, China is reducing coal use for power generation faster than expected, implying imports and prices will fall further.

Beijing has said it will do all it can to limit its addiction to coal to reduce pollution, raising fresh doubts about demand from the world's top consumer of the fuel just after imports slumped a third in February from a year ago.

Clean-fuel policies, as well as an economy growing at its slowest pace in 25 years, are driving lower coal use, with power companies using a greater mix of hydro, nuclear and renewable options, especially wind.

Coal still represents two-thirds of China's energy mix, but utilisation rates at thermal power plants - nearly all coal-fired - have dropped to 52.2% in the first two months of this year, calculations based on monthly power generation and consumption figures show.

"The demand situation in China has deteriorated over the last few months much faster than we had expected," said Georgi Slavov of commodity brokerage Marex Spectron.

Last year, utilisation rates at China's thermal power generators fell to a lowest-ever 53.7%, down from 57.3% in 2013 and resulting in coal for power use dropping 18 million t or 1.3% last year compared with 2013.

Many analysts said until recently China's coal-burning would soar into the 2020s as its effort to cut pollution was secondary to industrial growth. This consensus has shifted since Beijing started taking ever more aggressive steps to control coal use.

"China's impact on global energy markets will be transformed as its oil and coal consumption growth slows fast," Barclays said in a report this month.

Edited from source by Joseph Green

Source: Thomson Reuters 

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