THE WORLD COAL TRADE.

Poul Sachmann
l'-

<,

ELSAM, Denmark.

WOR LD Coal Study (WOCOL) with participation of people from major coal producing and using countries has analysed the need for coal and the role of coal as an alternative energy source for the rest of this century. The results are presented in the publication "Coal - Bridge to the Future". The study was carried out with a geographical split-up as shown in Figure 1. The members of WOCOL have made national reportswhich form the basis for WOCOL's predictions on the range of future coal production, use and trade. Two cases assuming different increases in the world's coal consumption have been considered. Case A with a growth rate of 1.75 per cent per annum and case B with 2.5 per cent per annum. Most of the coal is used for electricity production and even with a moderate growth of 3 per cent p.a. of the electricity consumption within the OECD-countries there will be an increase of the steam coal consumption from 600 mtce (million tons of coal equivalent) in 1977 to 1325 mtce in the year 2000. Figures 2 to 6 show some of the projections concerning electricity production and coal consumption which WOCOL has reached. Coal market and prices WOCOL is of the opinion that even with high transportation and environmental cost: the coal price will continue to be competitive to oil and other energy sources. The reason is that unlike the oil market the coal market and reserves are abundant and are spread throughout the world. It is unlikely that an international coal cartel - as in oil will be established.

Day One - Paper No.2

It is, however, likely that the coal price will rise in real terms. Costs to build up new mines, new health and safety requirements, environmental protection and costs in establishing new export facilities in ports will contribute to increased prices. On the other hand a higher degree of mechanization, larger vessels, etc. will reduce these increases. Over a long period the upper limit for the coal price will be the cheapest alternative energy, and production and transportation costs will be the lower limit in future. It is not likely that coal price will be coupled to oil price. Maritime transportation The increased steam coal trade projected by WOCOL will require radical improvements in transportation facilities and ports in most of the coal producing and coal consuming countries, and will have an essential influence on the development of maritime transportation in the years to come. The major coal trade routes go from USA, Canada, Australia and South Africa to Western Europe and East Asia (mainly Japan). (Figure 7). On the basis of the projections for coal consumption WOCOL has developed a forecast for maritime transportation in 1980 - 2000. The need for dry bulk transportation voyage) is shown below: (Unit: 1012 tons x miles) Other than coal 1980 1990 2000 5.5 7.8 10.0 capacity (amount of bulk transported x length of

Coal 1.1 2.1 3.7

Total

6.6
9.9 13.7

In comparison the total tonnage available in 1979, including combined vessels, amounted to 8.4 x 1012 tons x miles. The tonnage available and tonnage needed is predicted to balance in the period 1981 . 1983. It is expected that the need for new tonnage, including oil-tankers, will reach a maximum of 50 mio. dwt annually in the mid eighties. Experiences from the years 1970 - 75 where an enormous increase in shipbuilding activity took place show that with a sensible lead-time it should be possible to meet the capacity demand. Freight rates and vessel sizes Figure 8 illustrates the effect of vessel sizes on freight rates. The rates are calculated for a double voyage from overseas to Scandinavia and is a pure cost calculation with no regard to current market fluctuations. The largest bulk-carriers today are about 150000 dwt, but WOCOL expects that in order to reduce freight rates, the trend is probably towards larger vessels, even up to 250 000 dwt, before 1990.

Another factor which affects the freight rates is the expected backhaul opportunities. WOCOL is of the opinion that the growth in other bulk commodities will not be able to keep pace with the growth in the coal trade, and this will produce less backhaul opportunities in future with rising freight rates on the longest routes as a result. Port facilities Most of the large coal exporters have realized that it is necessary to invest in modern bulkhandling, storage facilities and larger ports which can accommodate large bulk-carriers. In Canada it has now been decided to expand Roberts Bank to 250 000 dwt vessels before 1984. The capacity will then reach 27 mio. ton annually. Furthermore a new port near Prince Rupert capable of handling 150 000 dwt vessels is planned with financial support from Japan.
I

In South Africa an expansion of the Richards Bay facility to a capacity of 44 mio. ton is being constructed and is expected finished in 1983/84. Today's capacity is about 22 mio. ton per year. A further extension to 100 mio. ton is possible. It might, however, be required that a new port is built in the southern part of Africa to meet increasing export volumes from South Africa, Mozambique, Botswana, etc. Australia which has a large coal export potential is planning to develop new coal terminal facilities. Hay Point can today accommodate vessels up to 150 000 dwt. In 1981 Newcastle will be able to handle 100 000 dwt vessels and further extensions are planned. Gladstone can today handle 60 000 dwt vessels at 12 m depth and is designed for future deepening to 16.5 m, and facilities to handle 120 000 dwt vessels. The Port Kembla facility is today able to handle Pan-max sized vessels and with the continued extensions it might be possible to handle part-loaded 170 000 dwt vessels. The United States has the largest coal export potential (Figure 6) and is expected to be covering a large amount of the increased steam coal demand in the WOCOL countries. It is obvious that there must be huge improvements in exporting facilities to meet this increasing coal demand. This is verified by the fact that the increase in coal exports this year has made the loading situation on the east coast almost impossible. At Hampton Roads and Baltimore the waiting time today is about 25 days, which, of course, influences the transportation costs and at the end the C.I.F. coal price. In the first five months of 1980 steam coal export (Canada excluded) was six times larger than last year's export in the same period. National Coal Association has now again revised its forecast for overseas export and is expecting 58 mio. tons of export this year. In the year 2000 WOCOL predicts that US coal export will be at least 125 - 200 mio. ton and perhaps reach as much as 300 . 400 mio. ton. Figure 9 shows projected US coal exports relative to total production.

It is therefore necessary that strong efforts are made to secure an improvement programme in order to reduce the waiting times. This can be done by making more efficient supply systems, building up larger stocks in the ports and improving the scheduling and planning. In the long run it is also necessary to build facilities to accommodate larger vessels. The US coal industry has been sceptical that a large export market will develop, but this scepticism is subject to change as coal prices and markets develop. Some of the large coal exporters have now reconsidered their views and you see a growing interest in establishing own loading facilities. Denmark and other importers try to encourage investments in loading facilities by giving these producers a high priority when buying. Importing countries Europe. There is a shortage of coal terminals capable of receiving large bulk carriers in Western Many plans for future development are, however, already made.

Ensted and Stigsnaes in Denmark are today able to handle 120000 dwt and E LSAM is investigating new locations for a port capable of handling up to 250 000 dwt vessels. In Rotterdam a new facility to receive 250000 dwt vessels is planned and also France, West·Germany, Italy, Spain and Israel are planning port newbuildings to meet the growing coal import. Japan has already metallurgical coal terminals for 150000 dwt vessels and new locations for the expected increased steam coal import are being investigated. Taiwan is planning new coal terminals for discharging bulk vessels up to 130000 dwt. Three of these are expected to be established already in 1983. Conclusions from WOCOL The long and the short of the major conclusions from the WOCOL study is as follows: • Coal is capable of supplying a high proportion of future energy needs. • The world coal production will increase 2.5 - 3 times before year 2000 and the steam coal trade will grow 10 to 15 times above the 1979 level. • Efforts are needed to secure supplies by investments in mines, transportation and port facilities, etc. • It is possible to mine, move and use coal in a way that meets a high degree of environmental protection. • The competitive power of coal will increase further as oil prices are expected to grow faster than coal prices.

Relations to coal fired ships The interest in coal-fired ships is now growing with the increasing oil prices. The main use of coal-fired ships will be in the coal trade because of the bunker facilities in loading and discharging ports. The cheapest coal is naturally available in the exporting ports and the coal bunkering is therefore most likely to take place there. In order to make coal-fired ships economically profitable, it is necessary with a high degree of mechanization and because of higher investments compared to oil firing, the utilization of the coal firing technique in vessels will probably be limited to large vessels, i.e. Pan-max and larger size vessels. Another subject which will certainly be conclusive for the success of coal-firing in ships, is the aoilitv to handle coal within a wide quality range, similar to today's qualities of steam coal used in power plants. But even if it is only coal carrying ships which will be coal fired it is WOCOL's opinion that bunker requirements could reach 50 - 60 mtce/year in year 2000.

Figure

1
WOCOL Geographical Regions
Developing Regions

r-------------------~
OECD Region • • • • • • • • • • • • I";anada United States Denmark Finland France Federal Republic of Germany Italy Netherlands Sweden United Kingdom Japan Australia Other:OECD

• India • Indonesia East and Other Asia Latin America Republic of South Africa Other Africa

Centrally Planned Economy Countries • Poland • People's R~public of China Soviet Union Other Centrally Planned

• Represented with members in WOCOL

Figure

2
OECD Electric Capacity Mix (1977-2000)

5,000

.

.--...,

i
j ...
!!'
2,000

21175

I

1.000

Each GWe of electric capacity requires 2 mtce/yr erated at a 65% capacity factor.

coal if the plant is op-

Figure

3
World Steam Coal Imports by Country and Region (mice) ..

Country I Region

1985 Case A Case B Csse A

2000 Case B

Denmark Finland France Federal. Republic of Germany Italy Netherlands Sweden United Kingdom

4.6 4.1 14

10.7 3.4

11.1
3.4 34

11
9 10.3 7.0 2.9

9.4 7.7 26
20

20.9
12.4

3
2.0

100
40 45.S·
34.2 23.1

11
10.9 7.0

1.5 0.3 37
1 7

3.2

16.5 19.9 14.3

I

15

------------------Canada
Japan TotaIOECO· East and Other Asia Africa and Latin America Centrally Planned Economies Total World· • Totals are rounded.

---OECO-EUrope--------

Other Western Europe

6 2 45 1
17 60

6 80

7

53 210 60
6 30

121 460
179

105 24
3 20

5
3

10
30 680

20 105

150

300

Figure

4
World Metallurgical Coal Imports by Country and Region (mtce)

Countryl

Region.

1:177

1985 Case A CaseS

2000 Case A CaseB

Finland France Federal Republic of Germany Italy Netherlands Sweden United Kingdom Other Western Europe --oEcb-europe-- ---

0.9

1

10
1

-

11

-

1 12

11.1 3.0 1.8 1
6

11.0 3.4 2.2
2

-

1 12

-

1 15

11.0
3.4

12 2.9
2.8

12
4.0

-~--------------Canada
Japan TotaIOECO· East and Other Asia Africa and Latin America Centrally Planned Economies Total World·

--7-60

-3"5-- --40-----45--- --57-----69--

10

2.2 2 13

2 24

2.8 2 32

-- ·r---- 5'-73 120 10 20 20
170

--9----~-79

76 125 16 20 20 180

85 160
48

100 3
7 18 130

145 40
57

20 260

80 20 300
I ,

• Totals are rounded. • Under conditions of high coal Increase in Case B. Canada meets a greater share of its coal needs from domestic resources.

:1

Figure

5
World Coal Import Requirements (1960-2000)

9110

, __

.!!

c

i

____ J
Figure

6
~

Coal Exporter Potentials-Year
-L ~

2000 (mtce)
350 ~UAijed Slates

.-:;

l1

50 Poland 50 SovIet Union

30 People's Republic of China

2S

Federal Republic

01 Germany

25 latin America

2S

Atrlca

'< +

Expanded Export PoIentl.1 01 Export Demand

Current Expectation

5 India. Indoneal.

o
Million Tons Coal Equivalent (mICe)

Figure

7
Maritime Coal Trade Routes

'.:

Figure

8
FREIGHT RATES

$/TON
35

30
25

20 15
10

<,
10 50

<,.. _

'-_ ---

US

5

----------150

OI4-------~---+--~~--~~~----+\/F~~FI Sl ZE

,· .
,

)

Figure 9 ' " US. COAL PRODUCTION & EXPORTS

mtc e

200 0

oexport
domestic use

-

201-

·1000
-

,

11'1. 9191cx. 891.

80%

1,
JJ ,1

1 1 !
~

1977

1985

2000

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