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COAL Medium-Term Market Report 2012 Summary

Core Content

The Medium-Term Coal Market Report 2012 by the International Energy Agency (IEA) provides a comprehensive analysis of coal markets, focusing on global demand, supply, trade, and future projections up to 2017. It highlights the role of coal as a primary energy source, especially in power generation, and its increasing dependence on non-OECD countries, particularly China and India, while noting the impact of natural gas and US shale gas on global coal dynamics.

Main Points and Key Information

Global Coal Market Overview

• Coal continues to be a growing source of primary energy globally.
• Non-OECD countries, especially China and India, are the main drivers of coal demand and supply.
• Coal accounts for over 40% of global electricity generation, making it a critical factor in electricity prices and power market developments.
• The report outlines two main scenarios: the Base Case Scenario (BCS) and the Chinese Slow-Down Case (CSDC).

Market Trends and Projections

• In 2011, China accounted for over 75% of incremental coal production, while its domestic consumption was more than three times that of global trade.
• Indonesia overtook Australia as the largest coal exporter on a tonnage basis.
• China became the largest coal importer, surpassing Japan.
• US shale gas revolution caused a decline in coal use in the US, leading to a gas-to-coal switch in Europe due to low gas prices and increased coal supply.
• India is projected to become the second-largest coal consumer by 2017 and the largest seaborne coal importer by 2016.
• Global coal demand is expected to grow by 17% from 2011 to 2017, with an annual growth rate of 3.9%.
• China is projected to account for over 50% of global coal demand by 2014 and 638 Mtce of additional coal use over the period.

Scenarios and Impacts

• Base Case Scenario (BCS) assumes continued economic growth and energy demand in China and India.
• Chinese Slow-Down Case (CSDC) is a hypothetical scenario where Chinese GDP growth slows to 4.6%, but coal consumption continues to rise.
• In the CSDC, India is expected to become the largest coal importer by the end of the outlook period.
• US coal consumption is projected to decline due to low gas prices and environmental regulations, while OECD coal demand is expected to grow at 0.4% per year.

Coal Trade and Market Dynamics

• International coal trade is highly influenced by policy decisions, infrastructure, and substitutes.
• Seaborne thermal coal and metallurgical coal are key components of global trade.
• Off-spec coal (lower quality coal) became more important in 2011 due to low freight rates, flexible boilers, and blending practices.
• Coal prices in Europe dropped significantly from USD 130/tonne in 2011 to USD 85/tonne in 2012 due to the US shale gas glut.
• China remains the largest coal importer in the BCS, while India takes over in the CSDC.

Export and Infrastructure Developments

• Australia is the largest coal exporter in the BCS, with export growth outperforming Indonesia if China’s demand remains strong.
• Indonesia has a lower cost structure across the coal value chain, making it less affected by the CSDC.
• Mozambique is a notable exception, with planned export capacity expansion.
• Infrastructure investments are crucial for coal export growth, particularly in existing and new mining regions.

Climate and Environmental Considerations

• The global climate change agenda has seen disappointing inaction, leading to continued coal demand growth.
• Carbon capture and storage (CCS) technologies have not taken off as expected, increasing the risk of climate policy backlash.
• Coal-based CO₂ emissions are a major concern, with the report highlighting the emission intensities of the top four emitting countries/regions.

Key Contributors and Acknowledgements

• The report was prepared by the Gas, Coal and Power Division (GCP) of the IEA, with Carlos Fernández Alvarez as project manager.
• Timo Panke, Johannes Trüby, and Ming Wan are the main authors.
• Expert guidance was provided by Didier Houssin and Keisuke Sadamori.
• The Coal Industry Advisory Board (CIAB) played an important role in providing data and insights.
• Data and analysis were supported by numerous contributors, including researchers, industry experts, and international organisations.

Conclusion

Despite the challenges posed by climate change and the rise of natural gas, coal remains a key energy source, especially in non-OECD countries. The report emphasizes the importance of China in shaping the future of global coal markets. It also highlights the dynamic nature of coal trade, the impact of infrastructure, and the potential for coal demand growth in the absence of effective climate policies.