Medium-term Coal Market Report 2012

Keisuke Sadamori. Director, Energy Markets and Security.

Paris, 18 December 2012

OECD/IEA 2012

Business as usual
Global primary energy supply from fossil fuels

Coal demand keep growing And so, too, coal trade

OECD/IEA 2012

China is coal. Coal is China

Fossil fuel demand in major consuming regions

* The increase in US oil demand in 2012 is caused by differing definitions. While historic data for US oil demand are based on IEAs Oil Information, projections of US demand refer to US50 oil demand as defined in Table 2 of IEAs Medium-Term Oil Market Report 2012.

OECD/IEA 2012

Power generation in non-OECD is crucial

Total coal-based electricity production in 2009 and 2010
TWh 700 600 500 400 300 200 100 0

Absolute growth 2009/10

35% 30% 25% 20% 15% 10% 5% 0%

2009

2010

Relative growth 2009/10

OECD/IEA 2012

US shale gas switches on coal in Europe

USD/GJ 6 5 4 3 1,5 2 1 0 1 0,5 0 Mt 3,5 3 2,5 2

US steam coal exports to Europe (right axis) Henry Hub price

Northwest Europe (ARA CIF) Coal price in Central Appalachia

Higher transportation costs for gas hinders regional integration In Europe, coal reacts stronger than gas to US low prices

OECD/IEA 2012

A golden age of coal in Europe?

Low carbon prices: the Eurozone crisis is a surprise, but the renewable ramp up is not Gas to coal switch is already limited by system operation constrains The need for conventional generation is declining Decomissioning of old plants is sure, but economics of new coal to build is questionable
OECD/IEA 2012

Moving East

59 Mt 109 Mt

Seaborne exports from Russia (93 Mt)

34 Mt 19 Mt

Seaborne imports to the Atlantic Basin (218 Mt)

Seaborne exports from the Atlantic Basin (128 Mt)

Seaborne exports from the Pacific Basin (498 Mt)

Seaborne imports to the Pacific Basin (573 Mt)

20 Mt

478 Mt

29 Mt

Seaborne exports from South Africa (71 Mt)

42 Mt

Atlantic Basin

Suppliers to both markets

Pacific Basin

OECD/IEA 2012

Coal prices are back in sync

USD/t 350 300 250 200 150 100 50 0

Newcastle steam coal (FOB) Australian prime hard coking coal (FOB)

Ultra-low volatile PCI coal (FOB)

OECD/IEA 2012

Indonesia-China, a good partnership

Seaborne steam coal trade

Steam coal imports to China

2009 (104 Mt) 2010 (133 Mt)

Indonesia meets much of Chinese demand For Chinese utilities, Indonesian coal is a good option For low cost Indonesian producers, Chinese coal thirst was good business
OECD/IEA 2012

Australia

Canada

United States

Other OECD

Colombia

Indonesia

South Af rica

Russia

Vietnam

Other

From Beijing to India?

Selected investments of Indian companies in coal assets

Country Australia Indonesia South Africa United States Total Number of investments 9 28 4 3 44 Acquired resources/reserves (Mt) 17 138 6 271 377 348 24 134 Capital expenditure (USD Million) 7 612 4 526 3 300 820 16 258

OECD/IEA 2012

Chinese slow-down can affect seaborne coal trade

Thermal coal
Exporters Mtce 100 80 Higher in the BCS 60 40 20 0 -20 -40 2017 Australia Russia United States Other exporters China Other importers Importers

Metallurgical coal
Exporters Importers

Lower in the BCS

OECD/IEA 2012

Two steps forward

Outlook for global export capacity utilisation for seaborne hard coal until 2017
Mtpa 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 2010 2011 2013 Probable expansions Exports historic 2015 2017 Potential expansions Exports - BCS Existing export capacity Port capacity Exports - CSDC

OECD/IEA 2012

Is slow-down already happening? BREAKING NEWS

OECD/IEA 2012

KEY MESSAGES
Coal demand rises over the outlook period, approaching oil Driven mainly by power generation in non OECD countries Shale gas revolution led to decline in coal consumption in the US, and to increased use of coal in Europe The large gas-to-coal switch in Europe is projected to peak in 2013 Whereas China will surpass the rest of the world in coal consumption, India will gain importance in coal market, becoming the largest seaborne coal importer Seaborne coal trade will continue to increase unless there is a slowdown in Chinese economy Announcements of cuts and layoffs, despite many projects in the pipeline

OECD/IEA 2012

Thank you for your attention

OECD/IEA 2012