With the Pope set to join the G7 and the Church of England to call for the neutralisation of fossil fuels, coal looks to be on a losing wicket. But the Australian coal sector, battered and bruised after several tough years, isn’t panicking. Indeed, the view that came through strongly at a coal seminar in Sydney this week was that the “eurocentric” stance espoused by those higher powers overlooks the importance of the fuel in Asia for supporting economic growth.
With more than one billion people still without access to electricity, a cheap and abundant fuel such as coal still has a role to play to help solve the problem, even under necessarily stringent environmental constraints.
Growth in hydropower
But evidence is growing that China has given up the role of the engine of Asian coal demand growth. BP chief economist Spencer Dale last week cited the stalling of China’s coal consumption in 2014 as perhaps the single most striking number in the UK oil major’s closely watched annual energy review. The 0.1 per cent growth, which compares with an average of almost 6 per cent over the past decade, reflected a general slowdown in China’s energy demand and exceptionally strong growth in hydropower.
China’s toughened-up quality restrictions on coal are acting as an added deterrent for Australian exporters, with few wanting to take the risk of cargoes being rejected, as one was in March, according to consultancy IHS. Indian growth in coal use of 11.1 per cent last year took up some of the slack from China, according to BP.
A coal seminar in Sydney this week hosted by IHS, which incorporates the respected McCloskey coal brand, identified India as the lead importer for many years to come. Coal imports that totaled just 10 million tonnes at the start of the century reached 176 million tonnes last year for thermal coal alone and are forecast at more than 300 million tonnes by 2040 as the Modi government prioritises the complete electrification of the country.
Yet, despite Adani this week reconfirming 2015 to give the green light for its $16.5 billion Carmichael mine in Queensland’s Galilee Basin, India was not portrayed by IHS as the saviour for Australia’s struggling exporters as they seek to replace shrunken Chinese market prospects.
Dominant supplier
While Australia will continue to be India’s dominant supplier of metallurgical coal, it is Indonesia and South Africa that will capture the huge volumes of India’s thermal coal import needs, with Australian exports remaining relatively insignificant, according to IHS senior manager Marian Hookham. Instead, Hookham points to south-east Asia and in particular to little-heralded Vietnam, which it expects to emerge as the world’s sixth-largest importer of thermal coal. As early as this year, Vietnam could switch from being a net exporter of coal to an importer, and with some 20 gigawatts of coal-fired power capacity in the pipeline for commissioning over the next decade, the nation’s coal imports are forecast to surge from just 4 million-5 million tonnes this year to almost 100 million tonnes by 2040. Both Indonesia and Australia are well placed to benefit.
South Korea too, looks to be committed to further growth in coal-fired generation, despite four coal plants being axed last week due to worries about worsening pollution in Seoul.
While Japan’s outlook is uncertain, particularly after the G7 commitments last week, Malaysia, Philippines, Taiwan and Thailand are all showing growth, with IHS projecting Asian coal import demand will rise 14 per cent to 847 million tonnes by the end of the decade, from 745 million tonnes in 2014.
The International Energy Agency is also pointing to ASEAN as a major area of growth in coal, putting the amount of new coal power generation coming online over the next five years at over 30 gigawatts.