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South Korea’s power boost

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World Coal,

Anthony Fensom, Australia Correspondent, World Coal.

Coal demand in South Korea is on an upward trend, with the world’s fourth-largest coal importer expected to increase imports to 131 million t in 2015 from around 120 million t last year on the back of new coal-fired power plants, despite a new tax on imports.

The growth reflects soft seaborne metallurgical coal prices, with South Korean steelmaker Posco pointing to increased supply in Australia and Russia. Posco expects prices to stay around AUS$113/t for 2015, with the oil price drop and Chinese import sanctions on coal adding to the downward price pressure.

Coal accounts for nearly half of South Korea’s total power supply, with Indonesia and Australia as the main sources of thermal coal. Domestically, the industry is dominated by state-run Korea Electric Power Corp. (KEPCO), which imports approximately 80 million tpy of thermal coal for its five utilities. Coal production in 2012 amounted to only 2.3 million t, a fraction of its 136 million t consumption that year.

Similarly to neighbouring Japan, South Korea boosted coal imports, after safety scandals in late 2012 forced the shutdown of several of its 23 nuclear reactors. In January 2014, Seoul adopted a lower target for nuclear power supply, but remained committed to building 11 more reactors by 2027.

In July 2014, the government imposed a new tax on coal imports for power generation, while cutting duties on some alternative fuels, aiming to curb power consumption and CO2 emissions ahead of the launch of a new carbon trading scheme in January 2015. However, coal used for purposes other than power generation was exempted from the tax, which is likely to shift demand towards higher calorific value coal.

According to Thomson Reuters Point Carbon, South Korea’s emissions trading market is the second-largest in the world behind the EU, but an oversupply of carbon credits will minimise potential switching from coal to gas-fired power.

The Korea Energy Economics Institute (KEEI) has forecast that the nation’s bituminous coal demand will expand by 4.5% to 127 million t in 2015, led by growing demand for thermal coal. Despite the resumption of operations at some suspended nuclear reactors, which reduced thermal coal demand in 2014, demand is expected to increase by 5.2% this year, as the nation adds more than 2000 MW of coal-fired generating capacity, following the 1740 MW gained in 2014.

Around 12 new coal-fired power plants are planned by 2021 under South Korea’s 14-year energy plan, adding to its 50 current plants with net capacity exceeding 26 000 MW.

With coal consumption having expanded by 55% between 2005 and 2012 and further increases planned, South Korea’s coal outlook remains promising despite its tax and emission imposts.

Written by Anthony Fensom. Edited by . This article first appeared as part of a report on East Asian coal demand in World Coal Asia 2015.

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