Study offers positive outlook for coal

Consumption for internationally traded thermal coal will likely remain strong, while coking demand is expected to be steady over the long term, according to a study by AME Mineral Economics of Australia.

Demand for internationally traded coal grew 7% in 2000 to 588 million tonnes and is expected to reach 600 million tonnes this year.

Thermal coal demand surged 9% last year on the back of strong demand in the Asian electricity sector. Coal-fired power stations continue to be built at an impressive rate, despite some winding-back of construction schedules. Coal is the most economical fuel for electricity generation in energy-importing countries without access to natural gas.

The study predicts that Asian thermal coal demand will continue to enjoy solid growth until at least 2005. Despite the “dash to gas” in Europe and only marginal consumption growth, European thermal coal imports will continue to rise as domestic coal production declines.

Coking coal demand dropped to 186 million tonnes in 1999, the same level as 1995, but rebounded to 193 million tonnes in 2000. The increase reflects a rise in world steel production to a record 847 million tonnes last year. AME estimates that overall steel production will grow by 1.3% over the next five years. Blast furnace iron production, which drives the coking coal market, will not grow as rapidly. Thus, only modest increases will occur in coking coal demand. The introduction of technologies such as coke dry quenching and coal moisture control in the production of high-strength coke will allow steelmakers to use higher proportions of lower-quality and cheaper semi-coking coals. The growth in demand for hard-coking coal will be a little weaker than for coking coal in general.

On the supply side, China remains a wild card in traded coal. China’s exports have grown and now have a significant influence on the market. In view of the rapid rise in thermal coal spot prices due to tightening supply through 2000, if China had not pumped an extra 17 million tonnes into the international thermal coal market, the world’s supply of coal would have become tight. China continues to help coal buyers this year with an export target of 63 million tonnes, or more than 10% of the international coal trade.

Over the next four years, Australia will cement its position as the world’s largest coal exporter, ahead of China and South Africa. Indonesia overtook the U.S. last year to become the world’s fourth-largest exporter of coal. And Colombia’s thermal coal exports are expected to double over the next decade