In Peabody Energy’s recent announcement of its full-year results, Gregory H. Boyce, chairman and CEO, made this comment: “China and India have permanently changed the seaborne met and thermal coal market landscape and have driven prices significantly higher.” This remark neatly captures the future of the coal industry.
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Take India, for example. The Integrated Energy Policy predicts that coal requirements for power generation will increase to about 1 billion t in 2024/25 and about 2 billion t by 2032. By the Government’s own estimates, indigenous coal will not be able meet this demand and the country will increasingly have to turn to imports.1 As our own correspondent reports this month, Indian companies, including the state- owned Coal India Ltd, are being encouraged to acquire mines abroad, particularly in southern Africa, Indonesia and Australia (see pp. 8 – 13).
China switched from a net exporter in 2008 to a net importer last year, importing 104 million t. Its voracious appetite for coal will continue to increase in 2010. Meanwhile, it has also been reported that Vietnam expects to become a coal importer within three years due to an industrial boom and rising power generation. Quoting a senior executive from Vinacomin, the coal’s export monopoly, the report indicates a figure of 3 – 5 million tpa as feasible, although the target could be as high as 5 – 7 million tpa. Indonesia and Australia would be the key suppliers.2
As well as these extraordinary cases, the traditional steel-producing nations in the region should see demand for met coal rise as steel production recovers with the global economy.
With demand looking strong in the long-term, it is the supply side that could cause problems. Logistical issues in Australia and particularly in southern Africa mean that increasing exports to keep up with demand may be problematic. South Africa is geared to supply the Atlantic market, but will also need to keep as much of its domestic supply as possible to meet its own rising energy demands. Botswana and Mozambique have much potential, as World Coal has often reported, but still require major investments in infrastructure before they can begin to export in any volume. It should also be remembered that, even if coal production can be kept level with export demand, Governments of coal producing nations may not let it go. The Indonesian Government is reportedly considering capping coal exports to ensure the supply of coal to domestic power companies, a move that could have a profound impact for the Pacific market.
With demand looking strong, and supply looking tight, Asia will dominate the coal industry headlines for many years – and World Coal will respond to that. Starting this month, the next three issues will feature regional reports from India, Russia – potentially an important supplier to China, although infrastructure is a problem (is it ever not?) – and Indonesia. In addition, the annual World Coal Asia Special will be published in May and feature extensive analysis of the region. After much gloom and doom, the future looks positive: the future is Asia.
1. BALAKRISHNA, S. and KUMAR, U., “Meeting India’s coal requirements”, energética India, (Nov./Dec. 2009), pp. 84 – 85.
2. “Coal-Vietnam/Trade”. Accessed at: http://uk.reuters.com/article/idUKSPU00513020100128.